No spare cash? Foolish
American -- Page 2
Blame it on our culture
We know our government is operating in
the red. Budget deficits have been a problem,
off and on, for years, and it doesn't seem to have any long-term
negative consequences for our country. At least, the average consumer
doesn't see it. And that doesn't even take into account our astronomical
debt, which we hardly ever read or hear about anymore.
Thanks to consumer spending, the U.S.
economy is recovering. Americans are contributing to our
nation's welfare when they buy services and products. Personal consumption
expenditures represent the biggest component -- as much as 70 percent
-- of GDP.
It is our patriotic duty to spend.
Isn't that what President Bush told Americans to do after the Sept. 11
attacks? Go about your daily business, he said. Go shopping. Madison
Avenue works hard to distract us from long-term goals, turning our attention to
desires that must be gratified right away. Advertisements make us long
for rugged independence via a new pickup truck, youthful beauty from expensive
skin-care products, a better golf game with a set of superior clubs.
It's quite common to supplement our lifestyles
by drawing upon reserves we haven't yet earned. We routinely
tap credit lines extended by card companies, banks, and finance
firms, some of it backed by collateral, some just unsecured debt.
the messages Americans hear impel us to behave like the grasshopper.
Yet deep down, we know that the ant is the better insect
to emulate. It's just not as easy to save as it is to spend.
Vexed by the paltry savings rates among Americans, politicians have
introduced tax cuts to get us to save. They've come up with numerous
breaks designed to motivate us to hoard money for retirement, for
education, and for the sake of saving itself.
While on one level we welcome getting tax breaks,
we don't always make the connection between taxes and savings. And
that's probably because our tax code is extremely difficult to understand,
something we only deal with when absolutely necessary.
To our credit, Americans are focused on paying off debt. We have
few tax incentives for keeping debt on our balance sheets (mortgage
debt is the big one we can count on writing off each year). Some
37 percent of U.S. respondents in the ACNielsen survey said they
use their spare cash to pay off debts, credit cards and loans. This
compares to the global average of 31 percent.
we need to learn from the cultures in the world that can teach us to save money.
Less than a quarter of the Americans taking the survey
said that after paying their living expenses, they put their spare
cash into savings. This compares to the global average of 36 percent.
Meanwhile, more than half of the respondents in the
following 11 countries said they normally put their spare cash into
savings or investments: the Philippines, Taiwan, Singapore, Indonesia,
China, India, Hong Kong, Thailand, Korea, Malaysia and Japan.
What is it about their cultures that enable them to
be better savers than Americans? I can't say for certain, and I
hesitate to generalize, but I suspect that folks in many of these
countries have more exposure to poverty than do folks in Western
countries, and poverty is something they would work on avoiding.
They do this by saving money today for tomorrow's possible needs.
The American population, as a whole, needs to understand
the trade-offs between saving for the future and living for today.
We need to strike a balance somewhere between the adventurous attitude
of the grasshopper and the no-nonsense, seemingly no-fun, outlook
of the ant.
But if we had to choose between the two, we would
do well to adopt the adage of the ant. In the end we really must rely on ourselves
to prepare for the challenges that lie ahead.