In the midst of the financial crisis that has plagued the United States over the past few years, quite a number of Americans began to change their habits regarding disposable income (income available after all the bills are paid). First of all, the amount of disposable income dropped off quite a bit for many households since 2007. Many Americans consider themselves fortunate if they even have any disposable income after they finish paying bills each month. Some are not so fortunate because they have less money to pay than they earn. Unemployment rose into double digits in 2010, more and more households find it difficult to keep ahead of the bill collectors.
People are now looking for a safe place to put their money after being hit with big time losses in their 401K accounts or their IRAs in 2008 and 2009. The stock market still isn’t attractive though it started to rebound last year from the miserable downturn at the end of 2008. But, at the start of 2010, it still appears grim. Now, more than ever, savings accounts are starting to look more attractive as Americans are beginning to take what little they have left over each week and tuck it away into a savings account.
But, you may wonder whether it is possible to save much during a recession. The real question is whether Americans will determine to save or try to continue past habits of spending to excess. What are the real obstacles to saving?
Low Levels of Financial Literacy. According to Annamaria Lusardi, a professor of economics at Dartmouth, Americans have not learned to save from an early age and have not been taught the value of saving. In an NPR online article dealing with saving during a recession, she stated that: “If you don’t fully grasp the power of interest compounding, you might not fully understand how quickly that can grow…”
Lack of Personal Discipline. With so much effort devoted to advertising in a consumer oriented society (especially in an economic downturn), the consumer falls prey to the next big temptation hitting the market like the iPhone or a Wii. According to Greg Daugherty, executive editor of Consumer Reports, consumers will probably cut back on purchasing during the recession, and they will be more value-conscious shoppers.
Easy Access to Borrowing Money. Lenders have made it extremely easy to borrow money. With the rise of cash advances and payday loans giving people shortcuts to quick cash it becomes way too easy to get much needed money for a price. Lusardi feels that the U.S. needs to make saving money as easy as borrowing it.
related visualeconomic articles
