The Lost Art of Savings

Posted March 9, 2009 by Bernz

Once upon a time in a land far far away, people put aside some of their earnings for a rainy day. They knew that there would be flush times and lean times. When things were good, they would squirrel away crops, can their own vegetables, and tuck some money away under a mattress. Inevitably, hard times would come, and those who had prepared ahead of time survived from their savings, while those who hadn’t bothered saving when times were good suffered.

piggybankThe average amount of savings per capita in the United States has declined by more than 80% in the past twenty years. What were once luxuries that people saved up for are now waiting to take home with a simple signature on a loan document. Total debt versus income has more than doubled in that same time frame. Now, instead of setting aside savings every paycheck, many people are making loan payments.

Debt represents risk. The more debt you have, the more vulnerable you are to economic shifts like the one we’re having right now. The prolonged recession we are experiencing is causing many- who live on the financial edge at the best of times- to falter. Personal bankruptcy rates are soaring as debt loads become unbearable and incomes disappear. Living beyond their means has caught up with many people and there is only more pain on the horizon.

Savings is the antithesis of debt. Saving money for emergencies or even for large purchases gives people stability during a crisis. Savings can meet temporary budget needs when income falls short or unexpected expenses arise. But savings must be replenished during good times.

Take a look at how much money you are earning versus what you are saving. If you are in the majority, your savings rate will be less than 10% of your gross income. Balancing putting savings aside with paying down debt will reduce your personal financial risk as much as possible. Saving a part of your income on a regular basis is just old-fashioned common sense.


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