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No spare cash? Foolish American -- Page 2

Blame it on our culture
Many of the messages Americans hear impel us to behave like the grasshopper.

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  • 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 national 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.
  • 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.

    Indirect savings incentives
    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.

    We're not deadbeats
    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.

    Nevertheless, 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.

    -- Posted: June 22, 2005



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