Saving for the Rainy Day

- Chester Bowles

For over two years now, American's personal savings have been in negative figures. Meaning that consumer are spending more than they are saving, with the majority of consumers spending more than they earn yearly.

How can this be?

Credit cards. Plain and simple. We have become a nation of spenders stressing little or no importance on what our grandparents called "a rainy day."

The savings rate compares after-tax income to the money spent on a wide range of items. It turns negative when people take on additional debt such as home equity loans or other credit, or sell assets, so they can spend more than their take-home pay.

The last time in history this happened was back in 1932 and 1933, during the Great Depression. A time of countless business failures, loss of jobs, rampant homelessness and record numbers of suicides. People were struggling just to survive. Today, we have become a nation that spends so much and saves so little. It will end when consumers cut back on spending, which in turn will spark a recession

Is this what we want? As recently as the second quarter of 1985, Americans were saving more than 10 percent of their paychecks. In 20 short years, American consumers have regressed 75 years. Are we not supposed to learn from the mistakes of the past?

"If you would be wealthy, think of saving as well as getting," Ben Franklin advised.

Have we become a nation of mindless sheep that is in a row boat going over the falls? Realizing, hopefully before its too late, that we should start back-paddling away as quick and as hard as we can. Our economy is in sad shape, being fueled only by the over-use of credit cards, excessive fuel costs and the issuance of sub-prime mortgages. What we are heading toward will make the events of the Great Depression seem minor in comparison.

Look at what has been happening with the stock market as of late. Look at the mortgage companies that issued those sub-prime mortgages scrambling to survive because once their rate adjusted, nobody could afford their homes any longer and have defaulted on their loans. Countrywide being the one in the most trouble needing a several billion dollar bailout.

Today, people have it backwards. They spend well beyond their means and don't save at all. We are a nation headed toward financial ruin, unless something is done.

Education is key. Children, our future, the rulers of tomorrow need to be taught from infancy on into young adulthood the importance of money management. It seems to be one of the most important issues people face in life yet few have been offered the education needed to effectively manage finances, including debt.
Education in these areas and many others will place an informed consumer on the path toward financial freedom. This will also allow them to make practical decisions regarding their finances and related issues that can design a person's life.

Credit was once defined as "Man's Confidence in Man." But in fact, the definition of credit today is more like "Man's Confidence in Himself." Using credit today means you have confidence in your future ability to pay that debt. Today debt and instant credit are part of our everyday lives.

Debt is not necessarily a bad thing. Ignorance is.

Know the rules before you play the game.