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February 2007 Topics: America needs to save more

By Carla Mahar
Extension Educator

            America Saves Week, February 25 - March 4, is an on-going campaign to help people realize the importance of saving for their financial security in later life. Nathan Dungan, President and Founder of Share-Save-SpendTM  organization, paints a dismal picture for most Americans’ personal financial security in statistics from his recent e-newsletter:

•      Our personal savings rate went negative in 2005 for the first time since 1933.

•      The current savings rate for young adults 25 to 34 is negative 6 percent.

•      The average credit card debt per household in the U.S. is $9,000 -- an increase of 167% from 1990 to 2005.

•      A stunning 75 percent of all U.S. workers have saved less than $100,000 for retirement. 

      In order for Americans to begin to save, they first need to reduce their debt, particularly credit card debt. One source of help is a University of Nebraska-Lincoln Extension web based program call Start Down the Road to Reducing Debt, www.paydowndebt.unl.edu. Here you will find numerous resources and ideas to help you. In addition, you can join the program which will give you access to worksheets and contact with UNL Extension Educators to answer specific questions. The site is confidential and free of charge. You will also find links to other resources including how to find reputable, non-profit credit counseling organizations. 

      Once you have control over your debt, you can begin to focus on saving for your financial goals. The America Saves web site has numerous tips on ways to save, www.americasaves.org   It will show you that you do not need to be rich to build wealth. Few people get rich from their wages alone. But by taking advantage of the “miracle” of compound interest - earning interest on your interest - almost anyone can reach long-term financial goals.

      By saving as little as $50 a month you can build considerable wealth. With a 5 percent yield, that $50 will net you $614 in one year; $7,764 in 5 years; $29,775 in 25 years; and $76,301 in 40 years.

      So where do you find that $50 each month?  Here are some ways:

•      Saving 50 cents a day in loose change = $15/month
•      Cutting pop consumption by 1 liter a week = $6/month
•      Substituting 1 coffee for 1 cappuccino = $40/month
•      Bringing lunch to work (saving estimated $3/day) = $60/month
•      Eating out two fewer times a month = $30/month
•      Borrowing rather than buying one book a month = $15/month
•      Paying a credit card bill on time to avoid late fee = $25/month
•      Paying off $1,000 of credit card debt, reducing interest = $15/month

Now you have some ideas as to how you can save that $50 each month. These are positive steps in the right direction.  Avoid taking steps backwards.  Here are some saving mistakes to avoid:

•      Not changing your spending habits and committing to save money
•      Not taking advantage of your company’s match in a 401(k) plan or other defined contribution plan
•      Not diversifying your investments
•      Not setting a specific dollar target or financial goal
•      Not knowing how much you have, where you are spending your money, and how much you need to save for the future
•      Cashing out your retirement plan

Start now to take control of your financial security. Join others for America Saves Week, sponsored by the joint partnership of Cooperative Extension and the Consumer Federation of America.  Contact your local UNL Extension office or Carla Mahar, Extension Educator, 1-866-865-1701 for additional information and resources.

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Updated May 30, 2007
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