Americans Just Aren't Saving

by Nicole D. Smith

January 8, 2008

Apparently, you are not the only one to feel torn between spending and saving. More than half of Americans, 52 percent, say they currently cannot afford to save or are inadequately saving, according to a comprehensive survey planned and released by the Consumer Federation of America and Wachovia. "I think consumers in general are thinking about 'What do I need to do today?' and 'What do I need to spend money on today?' and savings isn’t at the forefront of that," says Mindy Mercaldo, Atlanta west retail bank director of Wachovia. "It hasn’t been on the forefront of their minds to plan and to save for the future."

The survey, conducted by Opinion Research Corp., shows that impulse buying seems to be a major culprit, with 37 percent of Americans saying impulse buying was a major reason why they were not or could not afford to save. But Mercaldo doesn't feel people should stop impulse spending but to just be mindful. "People may never get rid of impulse spending. We all go to the malls, and we all shop and we all surf the Internet," she says. "We’re suggesting to balance that out with some level of savings so that consumers are protected in the event that we may have a downturn in the economy, they may lose their jobs or prices may go up."

How Well Americas Say They Are Saving
  
Poll: How well do you save?

Young adults, 18 to 24 years old, are the most likely demographic group to avoid saving. 62 percent  of young adults says they do not save adequately, and they cite social and psychological factors as large barriers to keeping their green. Specifically, they say that feeling good, social pressure and trips to the mall are the reasons why they do not save.  But according to Mercaldo, youth, time and saved money is a great combination. "The earlier you start saving money, the better position you will be in when you retire down the road” she advises, "even if you save just a a small amount every two weeks."

Nevertheless, Americans as a whole do understand the relationship between compound interest and successful saving, according to this research. In fact, the survey shows that 75 percent of those who labeled themselves as inadequate savers or nonsavers say contributory accounts, such as a 401(k),  are an important factor in persuading them to save. "Savings becomes so much easier when we’ve got interest compounding on interest," Mercaldo emphasizes. "Consumers can really make their money work for them over time." The survey also found that certain conveniences encourage Americans to save, like easy access to savings accounts that pay  percent interest, automatic transfers from checking accounts or payroll deposits into savings accounts.

Some major organizations and institutions, such as the Federal Reserve Board, Department of Defense, the Internal Revenue Service and United Way, are responding to the financial apathy of Americans by launching the America Saves-Wachovia savings education program. The program will be launched during America Saves Week, which begins Feb. 24. The program will encourage and demonstrate to both English-speaking and Spanish-speaking participants to save and demonstrate how to build their savings.

Mindy Mercaldo
Retail Bank Director, Atlanta West
Wachovia Bank