According to a 2015 Pew Research study, American’s are set apart from those in other countries by their belief in hard work, and in their general optimism. This extensive study which surveyed people in 44 countries, showed that the majority of American’s believe in individualism – the attitude that success is not just the luck of the draw, but something that is obtainable through hard work. In fact, when asked, on a scale of 0 to 10, about how important working hard is to getting ahead in life, 73% of Americans said it is was a “10” or “very important.” This is quite astounding when compared with a global median of 50% among the 44 nations.
American’s are also more optimistic than their counterparts. When asked by an interviewer how their day was going, about four-in-ten Americans (41%) described their day as a “particularly good day,” this nearly doubled the share of those in Germany (21%), and was 5 times higher than those in Japan who expressed the same feelings (8%). Those in the UK that answered with a similar sentiment were a higher number, but still just 27%.
With a belief in hard work, and a general feeling of optimism, one might wonder how this translates into money matters, particularly the savings accounts of the average American. Sadly, apparently it is not much. The 2015 GoBankingRates survey that put the internet on fire and financial planners on the edge of their seats reveals that 62% of Americans have less that $1,000 in savings, and around 21% don’t even have a savings account. So, with all the belief in controlling one’s destiny through hard work combined with a greater general sense of well-being than other wealthy countries, where is the disconnect? Let’s look at a few reasons that American’s have a difficult time saving.
We Aren’t Taught to Save
Unless you had financially savvy parents teaching you about personal finance while you were growing up, or were lucky enough to have courses offered at your local high school, chances are you had to learn about money the hard way. While finance is a part of our everyday life, according to the Council for Economic Education only 17 states require a course on personal finance and 20 states require an economics class for high school graduation. When we don’t learn the basics of debt, budgeting and saving when we are young, we will most likely learn through the school of hard knocks will when we get older. This could also explain MetLife’s recent findings that “49% of employees are concerned, anxious or fearful about their current financial well being.”
As Americans, we aren’t good at teaching about the “why’s” and “how’s” of saving, and it’s connection to our emotional health. Just understanding how consistently saving even a small amount of money over time can bring some financial clarity to an unknown future can help begin the process of controlling our financial destiny. That is the beginning of replacing anxiety over finances with a positive outlook towards one’s financial future. Just look at how compound interest can have a dramatic effect on your money with our saving interest calculator.
We Have Access to Easy Credit
As soon as your college students enters the world of higher education, there is a good chance he or she will be solicited by a credit card company. The astronomical costs of college combined with a lack of financial prudence, can open the gate to debt with so many young adults to apply for a credit card. The low introductory interest rates make it difficult for the typical “starving college student” to resist the tempting offers. Too soon these young adults are trapped in a world of late payments, finance charges, and balance transfer fees, with any extra money going to pay down debt instead of building a savings account. The average student has not only accumulated credit card debt, but student loan debt as well, and without a careful financial plan, the debt cycle continues into their marriage and beyond. The best way to minimize debt is to enter into it with caution. Our student loan payoff calculator helps you to gauge student loan pay off with anticipated future income.
We Like to Live for the Moment
The act of saving is really a process of deferring gratification. It is setting aside money to be used for a determined or undetermined purpose in the future. However, American’s, by nature, like to live with a carpe diem attitude – living for the day without thinking about tomorrow. We buy into the “no interest for 30 days,” promotions or extended payment plans because we think in terms of what we can get today, not about the financial repercussion that our purchase(s) will have on us 30 days or several years from now. Without visualizing the financial impact our debts will have on us just a few months or years from now, it is even more difficult to consider the effect our lack of financial preparation will have on our 70-year-old self. This is perhaps one of the reasons that 73% of consumers are dying with outstanding debt according to data provided by Credit.com by credit bureau Experian. We simply want to live without the restrictions that come from our obligation to take care of our future self.
We Live Above our Means
Americans work hard, and we also play hard. We live in a country and at a time where every possible material item is at our fingertips. The latest phone, the newest car, the weekend trip to the Caribbean are all available even if purchased by loan or credit. We travel with our kids for their competitive sports, and hire a personal trainer with our renewed gym membership. We think it is all normal because when we look around us everyone seems to be buying and doing the same things. It just seems to be part of the American lifestyle. But what also is part of our lifestyle is a very small contribution of our income to personal savings. Consider and compare the 4.5% personal savings rate of American’s to France’s 15.4%. Our desire to obtain or keep up a certain lifestyle can come at a substantial cost, or perhaps better stated an opportunity loss, for personal and retirement savings and emotional peace of mind.
While there are many other reasons that American’s have a difficult time savings – some due to circumstances beyond our control such as illness, unemployment, or the difficulties that come from perpetual poverty – for many of us, we can do better. We can take the qualities of rugged individualism that make us hard workers and rely on our optimistic natures to turn a corner in our spending and saving decisions. We can watch our work pay off in the way of compound interest through long-term investments and feel optimistic not just in our circumstance today, but towards a retirement full of happiness and security with and for those that we love. We can choose to live and be differently now so that we can live with peace of mind in retirement. Ensure you are on the right track with saving by trying out our retirement planning calculator.