Americans are finally beginning to rediscover the joy of saving
The global financial crisis may have pushed many Americans to start saving this year but Carl George saw the need to promote the value of the piggy bank five years ago.
The senior executive partner and former CEO of national accounting firm Clifton Gunderson, George said the American Institute of CPAs first launched a financial literacy campaign in 2004.
"We want to try and change the behavior of Americans towards more savings and less debt," said George from his Peoria office.
"We are living the case study," he said, referring to the economic problems that have recently beset the country. "What we're experiencing is in large part due to overspending, mounting debt and just not having enough savings," said George.
In 2006, a "Feed the Pig" marketing campaign was introduced to encourage Americans to "get back to basics," he said, referring to the concept of the simple piggy bank but targeted at consumers between the ages of 25 and 34.
"The idea was to help young Americans (with savings)," said George, noting that the 25- to 34-year-old age group involves people that start families and buy homes and cars - and get into debt.
"It's the second-biggest age group (behind those 35 to 44) when it comes to filing bankruptcies," he said.
Michael Mihalik can attest to being saddled with debt at an early age. Now 42, the Seattle engineer said that, soon after college, he found himself buried in debt even though "I had a good job."
"I was 24 when my eyes opened up. I had to change the way I thought," he said. Mihalik wrote a book after his economic revelation called "Debt is Slavery."
"I began realizing that possessions become a prison. People have to be aware of what I call the Giant Marketing Machine that has only one goal: To sell you something," he said.
"Now that I realize what they're trying to do, I look at commercials differently now," said Mihalik.
Savings balances are up
Many people are also looking at their piggy banks differently, said Ray Pratt, a senior vice president with Busey Bank from his Champaign office. "Overall, what we're seeing are savings balance increases. They're up 8 percent for the year and up 15 percent since the end of 2007," he said.
"There's been a re-emphasis in savings in the last couple of years. People are saving for a rainy day again," said Pratt, noting that recent economy troubles and general uncertainty in the economy may have alerted many to the importance of savings.
While basic savings products haven't changed, banks now offer a host of financial options for customers, he said.
"My advice is to let an expert handle it. Banks have the resources to answer questions," said Pratt. "The key is to find someone you trust," he said.
Jay Glatz, vice president of marketing for the State Bank of Speer, also reported an increase in savings activity. "The sale of certificates of deposit is picking up," he said.
"Baby boomers are looking for different opportunities - safer investments than just the stock market," said Glatz.
Meanwhile, consumers aren't consuming as much as they used to, he said. "People aren't spending the money on motorcycles and boats these days," said Glatz.
Preparing for the worst
While saving money in hard times can be difficult, Glatz offered several suggestions. "Keep a record of your expenses. If you use a debit card, write it down or check your account online. We also encourage customers to check their credit reports on a regular basis," he said.
Setting up a savings account is particularly important in trying times like these, said Jeff Telling, regional manager for Family Credit Management, a Chicago-based credit counseling firm.
"In our classes we used to suggest saving a minimum of three months living expenses. Now it's up to nine months. Even nine months may not be enough with the layoffs we're seeing," he said.
Telling said it's important to get back to basics when it comes to money management. "What is savings? It's money you put away to grow. People say they have a savings account but they raid it every month," he said.
"ATM access to savings is too easy. You have to fight human nature. People need constant reminders to save and to fight impulse buying," he said.
Training consumers to save and spend sensibly is what motivated Anton Simunovic, a successful venture capitalist in Westport, Conn., to design a high-tech savings tool to instill the concept of thrift in the young.
Teach your children
"What the recession is teaching is to go beyond just savings," said Simunovic, the father of six, proposing that giving kids an allowance for chores or achieving goals doesn't impart financial literacy.
"Only when kids are enpowered do they learn how to save (and spend) responsibly," he said.
His Web site, www.ThreeJars.com, lets kids divvy up funds into three separate categories: Save, Spend and Share. "They decide on how much to store up, what to spend and how much to donate to charity," said Simunovic.
Interest is tabulated automatically so that young savers can see the fruit of their financial labors. "(ThreeJars) is not a computer game but we use the computer to teach kids how to manage money," he said.
Parents set the allowance limit for each child and, come payday, the site adds the new money to their total, said Simunovic. "The Web site is not a bank. Parents hold the cash," he said.
The ThreeJars site went active in September after two years of preparation, said Simunovic. A family can sign up for $30 a year with a free 15-day trial offered, he said.
But savings isn't the only thing kids can learn from the site, added Simunovic. "When a child spends their own money, they get thoughtful (about purchases) quickly," he said.
Clifton Gunderson's George remains optimistic about the nation's financial situation. "I know the economy will bounce back. This is the greatest economy in the world," he said.
"But in the meantime, we need to make some adjustments - and not just dig yourself in deeper when it comes to debt," said George.
"Somehow figure out a way to sock some away - even the smallest amount. We used to be the best savers in this country. We're not now. We need to get back to saving."
Steve Tarter can be reached at (309) 686-3260 or email@example.com.
- U.S. consumers reduced their debt for the seventh straight month in August, according to the Federal Reserve. Total seasonally adjusted consumer debt fell $11.98 billion, or at a 5.8 percent annual rate.
- U.S. credit-card debt fell $9.91 billion in August, or 13.1 percent, marking the 11th straight monthly drop in credit card debt, noted the Federal Reserve.
- U.S. banks will collect more than $38 billion in fees this year from consumers who overdraw their checking accounts, according to Moebs Services.
- Credit card debt is growing most quickly for Americans 65 and over. According to USA Today, that age group's debt is up 26 percent since 2005.
- Rule changes made by the U.S. Treasury Department in September make it easier for employers to enroll workers into retirement plans while helping employees convert unused vacation and sick leave pay into 401(k) contributions.