A time to save

More Americans are trying to save money as they contend with the recession, and Spokane residents are no different.

But officials at local financial institutions, social service and counseling agencies say many households that stretched to set aside a few dollars in the best of times now strain just to keep up with their bills.

For some, they said, debt reduction is the best avenue toward rebuilding net worth, with the hope a newly developed thrift habit will turn them into savers when better times return.

Thrift went out the window mid-decade, to the extent that in 2005 Americans tapping into their home equity spent more than they earned. As home prices collapsed and jobs disappeared, they have retrenched, pushing the national savings rate to 4.5 percent in June.

A comparable local number is not available.

But Eastern Washington University Professor Dave Bunting said Spokane residents have difficulty saving money because median household incomes, at $45,551 in 2008, are 10 percent below the national average despite a faster rate of increase since 1990. Per capita income, at $32,769, is 20 percent below the national average.

Almost 80 percent of all saving is done by households with incomes in the top 20 percent, he said.

“Most of us are pretty low savers,” said Bunting, who in January published a study titled “The savings decline: Macro-facts, micro-behavior.”

The recession and looming retirement needs brought many former free-spenders back into the saving fold, said Greer Gibson Bacon, a financial consultant with Spokane’s Asset Planning & Management Inc.

“I really don’t have anybody who can’t save,” she said, but her mostly upper-income clients lost sight of the difference between what they want and what they need when the economy was thriving.

Often her first task is defining that line, then addressing the want-related debt, Bacon said.

As clients make headway against past obligations, she said increased savings become the new objective.

“They’ve got to create room in their budget,” said Bacon, who added that low interest rates – around 1.25 percent – are a disincentive to save.

Low-income households are losing what little room they had, with the squeeze so tight in a few cases they have dropped out of programs that paid them to save.

At Spokane Neighborhood Action Programs, some clients who had enrolled in the Individual Development Accounts program are either dropping out or taking a leave, said Kerri Rodkey, head of SNAP’s micro-enterprise program.

IDA matches up to $2,000 in personal savings with $4,000 in federal, state and private money. The money must be used to buy a home, start a business or pay for education.

Rodkey said SNAP is allowing some participants to make emergency withdrawals to keep them in the program.

“I wish I could tell you that people are saving, but I don’t think I can say that,” she said. “It is a really bad time for low-income people to save.”

Demaris Krummel, chief executive officer of the Union Credit Union in Spokane, said members are focused less on saving than making loan payments. Union is extending loan repayment periods and taking other steps to help avoid defaults, she said.

“They need to get over the hump,” Krummel said, adding that the credit union has seen some incoming deposits pulled out of bank savings accounts.

“Savings is off the radar,” agreed Julie Griffith, head of education for the Spokane office of Money Management International.

Money Management, formerly Consumer Credit Counseling, helps clients develop budgets that enable them to pay down debt and gradually build a reserve that will get them through hard times. Without a savings cushion, Griffith said, the loss of a job or other setback will land them in bankruptcy.

She said some financial institutions and social service agencies, not just SNAP, offer bonuses to customers who keep a new account open six weeks, for example.

Cammy McCluskey said more people are taking advantage of such a program at the YWCA, where she periodically gives financial education classes.

But at the Banner Bank branch she heads in Hillyard, McCluskey said, the savings accounts opened with income tax refunds were tapped out more quickly than usual. “It’s a different year,” she said.

Some of the difference, and one of the reasons timely local statistics are so elusive, is the shuffling of deposits by customers worried about the health of their bank.

Cindy Leaver, chief financial officer at Numerica Credit Union, said new deposits, including checkbook, passbook, money market and certificates of deposit, increased 7.6 percent from August 2008 to August 2009, more than five times the rate of the 2007 to 2008 period. Passbook accounts increased more than 11 percent, she said.

Loan growth, on the other hand, has slowed to 5 percent compared with around 15 percent earlier in the decade.

Deposits at Spokane’s two largest banks, Sterling Savings and Washington Trust, have also increased.

Susan Glover, head of branch operations at Washington Trust, said about 2,000 new accounts have been opened this year. April and May are usually good because people are parking their tax refunds, she said, but July and August were also good.

“Our balances in out savings accounts are up, too,” she added.

Sterling Executive Vice President Debbie Meekins said accounts are up, and customers are using them more conservatively. Instead of using credit, she said, they are writing checks or paying with debit cards.

“People are planning a little bit better,” she said.