Why You Can’t Be Trusted to Save Money

I was skimming through Reddit and found this (kind of) offensive video on “Why American's Are So Bad at Saving Money“. Here, have a look and let me know what you think in the comments section.

To the author's credit, it's true we aren't doing so great at saving money. As the video states, in the 1970's, American's socked away about 12% of their take-home pay. Today, that number has dwindled to 5%.

But, can you blame us?

Our “needs” have certainly changed in 40 years. Today, we “have” to buy:

  • cell phone
  • cell phone plan
  • cable or satellite
  • home
  • car
  • health club membership
  • college education
  • big screen tv
  • laptop
  • desktop computer
  • pet
  • vacation
  • latest gadget
  • and so on

Many of these things never existed in the 70's. But, can you imagine living a single day without your cell phone? Or the laptop?

And even with all these things we now have to purchase, the cost of everything else is also rising: food, gas, utilities – it's all going up.

Add to that, our wages have remained stagnant.

What's an American citizen to do? Well, not save money, I guess (I hope you are detecting an overtone of sarcasm at this point).

You just can't save money?

I guess what I'm most troubled by is the notion that we American's just can't save money. That (according to the video) “we can't be trusted to save money“.

While it took me awhile to grasp the importance of putting money away, I am not sure that mandatory savings is the way to go.

What do you think? Do you participate in a workplace that requires you to opt-out of 401k or other retirement savings plans? Do you think American's should be force to pay into savings (much like we do with taxes)?

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  1. Interesting point about forcing people to save. While I do agree that Americans suck at saving money, I believe that financial education is the best route to improve their savings percentage–compared to government or employer forced savings. That seems wrong on many levels, although the intention is good.

  2. In the past, people found satisfaction in relationships with family, and friends. They were not so closely glued to their televisions. Studies have shown that the more TV you watch, the less satisfied you will be with your own life, and what you own. Advertisers know that people in the USA have a strong desire to be somebody. They want to be one of the Joneses. Turning off the TV, and working on your own happiness might help you.
    Maybe, we should have all schools teach required courses in personal finance. The number of people I encounter with little to no knowledge of personal finance is staggering.
    A coworker is 42 years old. She participates in the 401k at work but has no IRA. She constantly watches TV shows that make her feel like she needs to buy certain things to be somebody.
    She told me I needed to spend my emergency fund to buy a new vehicle because mine was not a newer model. I tried to explain to her that emergency funds are only for emergencies. She just didn’t get it. She has a second home that she is trying to rent out (across the street from the one where she lives.), and says she can’t afford to sell it because she needs the income tax break. I tried to explain to her that if she’d max out her 401k contributions, she’d get a larger tax break, and have more money saved for retirement. She couldn’t grasp it.
    I really do think a required course in personal finance is necessary, and Americans need to learn to be content with what they own.

  3. Thanks for all the comments. It’s certainly an interesting discussion and one that is important to have. I think it speaks to personal responsibility and how much we want to abdicate that to the powers that be.

  4. Awesome, sometimes you just have to put it out there black and white. Some how our parents and grandparents survived without devices. Wants vs. needs is always an interesting discussion.

  5. It’s hard to say whether savings should be mandatory or not. It’s true that we have a habit of trying to keep up with everyone else at the expense of our future. However, sometimes it’s better to not save and use that money for your business idea or a real estate purchase.

    On the flip side, if people don’t save, then the government (our tax dollars) have to go to fund their additional expenses. Personally, I’m a fan of workplaces that offer a great 401(k) matching program.

    Regardless, it is incredibly important to save, and we should all be doing it (I’m preaching to myself).

    Great topic to think about. Thanks for sharing!

  6. I certainly don’t think that there should be a government mandate to employers to institute automatic retirement savings. If companies want to do this on their own, and require an opt-out then I am fine with that. I have heard of a few plans where regardless of if the individual contributes anything, the company will still put in a percentage of their pay for them.

    Education and gentle prodding I think is a good way to go, I think it would be a good idea for employers to send out a quarterly email or newsletter reminding employees of the retirement benefits that are offered and the effects of different savings rates on retirement income. Mrs. C.’s employer sends out postcards probably twice a year with this type of information on it.

  7. I was pro auto enrollment at work for employees. The rates of 401k enrollment were horrible and employees were leaving free money on the table. The company would contribute 5% if you contribute at least 1% and still employees weren’t doing it. So now they auto-enroll employees and they have 45 days to cancel but when they do HR can talk to them before and explain what they are actually going to be missing out on.

  8. “As a staunch conservative I am totally opposed to the government forcing us to do almost anything.” I was going to mention something totally opposite in the fact that we are already forced to save due to a portion of our paychecks being put towards Social Security, but I understand what you meant.

    I think companies are automatically enrolling people into a 401K in the same way we tell kids to look both ways and brush their teeth before bed. Everyone knows that saving towards retirement is a good thing, when you are capable of making that decision to choose another avenue, go right ahead, but until then they plan to lead you in the right direction.

  9. As a staunch conservative I am totally opposed to the government forcing us to do almost anything. However, I do like the opt out provision that many companies have added to their retirement plans. Most people will stay in the plan simply do to inertia. They won’t take the time to complete the paperwork to drop out. And it is certainly better to save something for retirement, even if it is a minimal amount, than to have people on welfare.

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