A Savings Account

My decision as to whether or not to save in my workplace savings plan wasn’t long or complicated. 

Yes, I had to actually fill out a form, and yes, I actually had to figure out how to invest those savings (though in fairness, there were only four funds from which to choose, one of which was company stock). Yes, there was also a generous match, but when you’re young there are more enticing ways to spend your income than—well, not spending it. That said—and at age 22 I’d not always fully embraced my parents’ counsel—my mother didn’t hesitate to insist that I did so.  

My mother, now a retired school teacher, then (and still) reminds me with some regularity (and deserved pride) that she began having $50 taken out of her paycheck at work—though my father protested at the time they couldn’t afford to do so. Or at least he did until he saw that first quarterly statement—at which point he began looking into how he could start saving in his workplace savings plan. They started relatively late in their working lives—and yet she continues to draw from that 403(b) account (and my dad’s, which has outlived him) to this day.

Those memories have a special resonance for me this week—which happens to be America Saves Week—and while if you’re reading this, you likely save every day, many Americans don’t. While the overall theme/focus this year (it’s been a “thing” since 2007) is on “building financial resilience,” each day of this special week has a different focus: yesterday (Monday) was Save Automatically, today is Save for the Unexpected (and boy, hasn’t COVID reminded us anew and afresh of that need?), Wednesday—a particular favorite of mine—Save to Retire, while Save by Reducing Debt is on tap for Thursday and the week wraps up with a focus on Save as a Family.

Now, arguably every week could (or at least should) be America Saves Week—but this week’s special focus provides us all with an opportunity to share not only success stories, but practical insights on how to do what we’re told (often by ourselves) what can’t be done. 

You don’t have to have a workplace retirement savings plan in order to save, of course—but it helps. We regularly cite data that proves that even modest income workers—those earning between $30,000 and $50,000/year—are 12-15 times more likely to save via their workplace savings plan than left to do it on their own. It’s a combination of making it not only automatic, but easy! Particularly these days with automatic enrollment, diverse default investments like target-date funds and managed accounts, and the option of automatically increasing that rate of savings on a regular basis—easy, automatic and efficient. 

I’ve never been very comfortable lecturing others on the importance of saving—we all have unique circumstances and challenges to overcome, after all—and saving is, ultimately, a matter of personal responsibility and choice. But I need look no further than the example of my parents to see the impact that a savings discipline and, let’s face it, sacrifice, can make.

See, my dad thought they couldn’t afford to save, but the reality is—they couldn’t afford not to. 

- Nevin E. Adams, JD

Goals Tending

The bad news is that times are still tough for many Americans—and surveys suggest that even those with jobs are nervous about their prospects for the future. The good news is that the current level of economic uncertainty seems to have brought about—at least for some—a heightened awareness of the need to set money aside for a rainy day, perhaps even those rainy days in retirement.

That said, the weak economy has certainly constrained the ability of many to save. In fact, a recent national survey found that an increasing number of Americans are having difficulty saving to meet goals ranging from meeting emergencies to affording retirement. The survey—released as part of America Saves Week(1)—noted that over the past three years, there has been a decline in the number of people who spend less than their income and save the difference, are building home equity, have adequate emergency savings, and think they are saving enough for retirement.

However, the survey also revealed that having a savings plan has beneficial financial effects, even for lower-income families. Consider that 85% of those who had a savings plan spent less than their income, (86% of this group felt they had sufficient emergency savings), and 3 in 4 said they were saving enough for retirement.

On the other hand, just 44% of those without a savings plan claimed to be spending less than their income, while 43% said they had sufficient emergency savings. Fewer than 1 in 4 of those with no savings plan said they were saving enough for retirement.

And yet, while those with a plan for savings had significantly better savings behaviors, fewer than half of survey respondents said they had “a savings plan with specific goals.”

It is admittedly simplistic to chasten those truly unable to save because of challenging economic circumstances. On the other hand, there are surely some today better able to weather those economic storms because they chose to set money aside during less tumultuous times.

That first step on that path, and it’s a critical one, is to Choose to Save.® As America Saves Week reminds us—and those trying to help others save—there’s no better time to start on that path to Save For Your Future® than today.

- Nevin E. Adams, JD

Note: Organizations interested in building/reinforcing a workplace savings campaign can find free resources—and a handy schedule of events around which to construct a program—here courtesy of the American Savings Education Council (ASEC).



Endnotes

(1) America Saves Week is an annual event where hundreds of national and local organizations promote good savings behavior and individuals are encouraged to assess their own saving status. America Saves Week is managed by the Consumer Federation of America (CFA), and the American Savings Education Council (ASEC). ASEC is a program of the Employee Benefit Research Institute (EBRI), which commissioned the survey, undertaken by Opinion Research Corp. You can find out more about America Saves Week here.

(2) Choose to Save® is sponsored by the nonprofit, nonpartisan Employee Benefit Research Institute Education and Research Fund (EBRI-ERF) and one of its programs, the American Savings Education Council (ASEC). The website and materials development have been underwritten through generous grants and additional support from EBRI members and ASEC Partner institutions.