It’s a bottom-line ‘90s question.
What gets people to save money?
We’re constantly hearing that Americans, baby boomers in particular, don’t save enough. The horror stories forecasting grim, underfunded retirements are all but inescapable.
But there are exceptions. Though we don’t often hear about them, some people are serious about socking it away. What’s their secret?
That’s easy. At some point, they stopped procrastinating. And they started saving, even if just a little bit at first.
“There’s no magic out there,” said Pat Killien, a financial planner with American Express Financial Advisors in Spokane.
Some people approach saving in search of tax advantages, he said. Others realize they need to open their eyes and plan for the future. “But whatever gets them to do it is good,” he said.
Because everyone agrees that the earlier you start, the better off you will be down the road.
But the voices urging us to think long-term about finances have a lot of loud competition. “It’s called advertising,” said Killien.
Pep talks about how compound interest can multiply money saved early in adulthood tend to be drowned out by the buy-now messages of Madison Avenue.
Still, saving doesn’t have to be all about begrudging self-denial. It can feel good. Killien has seen it happen. “You set someone up on a systematic investment arrangement - you know, where you take the money out of their bank account automatically - and it’s kind of neat to see how excited they are after six months to see the money that has accumulated,” he said.
But is it fear or simple discipline that motivates savers?
It depends in part on why people do it. Putting money aside for retirement is a somewhat different mind-set than filling up the piggy bank for a new boat. In any case, it requires a sense of delayed gratification - something our credit-card wielding culture seldom emphasizes.
“It’s a trade-off between consumption and saving,” said Kent Hickman, assistant professor of finance at Gonzaga University.
In his view, the decision to stockpile money is only partly an intellectual commitment. In the end, it has to make you happier than, say, buying a stereo or an expensive car.
In other words, you’ve got to enjoy it in some sense.
“You save for security reasons,” said Hickman. “If you lived through the Depression, you don’t forget it.”
But he theorized that some baby boomers who grew up in comfort have failed to come to grips with the need to prepare for the future.
Some are counting on inheritance. Some are counting on pensions.
A few are in for rude surprises.
Killien said it is not uncommon to encounter people who do not believe Social Security will be there for them when they reach their senior years but who are not doing anything to compensate for that assumption.
Of course, not everyone is a spendthrift.
Larry Jenkins, a Spokane financial planner, has seen people get so fired up about saving money that they almost become obsessed. “When that happens, when people start to get carried away, I’ve got to caution them that they’ve still got to live today and they can’t put everything away for tomorrow,” said Jenkins.
Savaholics? Why not. Some people saw the toll money problems took on their parents and have vowed not to wind up in similar straits. Some see the light when they read how much college will cost by the time their kids are ready. Others have gone through losing their jobs and subsequently burning up an inadequate nest egg.
Still others learn to save as a result of disastrous experiences with burdensome debt. Michael Hayes, director of education at Spokane’s Consumer Credit Counseling, has seen individuals burned by ridiculous spending habits turn into super savers. “One 26-year-old guy I’ve worked with made such a big change that he gets paid twice a month and puts one entire check into savings.”
That’s not exactly the norm, however.
“I’m convinced many Americans don’t care about tomorrow,” said Killien.
They should though, say personal finance specialists. Tomorrow’s going to be an expensive place to live. , DataTimes ILLUSTRATION: Staff illustration by Charles Waltmire