FOR AMERICANS OLD enough to remember when their parents had Christmas Club accounts at banks, and when elementary-school teachers reminded students to bring in a quarter for their weekly savings account deposit, the concept
of regular savings is nothing new.
But too many Americans, unfortunately, never acquired the habit of thrift — or if they did, they've forgotten its virtues. Given the monumental government debt and yawning trade deficit resulting from our profligate spending and the dramatic decline in the nation's personal-savings rate — from about 10% of disposable income in the early 1970s, according to the Commerce Department, to around 4% currently (a slight improvement since the financial crisis) — it's time to make savings a priority.
Doing so will require a significant shift in consumer behavior, and that is where financial advisers can play a vital role.
Particularly today, most people view saving as a form of denial. By definition, of course, savings is what is left over after consumption, so an increase in savings translates into less money available for buying things now. And since Americans always have been avid consumers, serving as the locomotive of the national economy, expecting us to forgo anything from the available cornucopia of goods and services not only is unlikely but practically a request to deny a major part of the American dream.
But the American ethos is bigger than consuming one's share of the nation's bounty today. It also is about the promise of an ever-better tomorrow, as well as the belief that personal freedom and independence are products of having financial security. In fact, the rewards of starting one's own business and making it big are not measured in money alone but in the freedom to live life your way, and not being compelled to do anyone else's bidding.
Tapping into that spirit of freedom is what we should be doing to encourage thrift. Instead of focusing on the belt-tightening and doing-without connotations of savings, which clearly are not in sync with the American character or experience, let us concentrate on how savings can produce a brighter future and increase our personal choices.
Work is already under way on that front. The National Retirement Planning Coalition, an organization of 17 retirement savings organizations and trade groups, sponsored a National Retirement Planning Week this month to encourage savings (InvestmentNews, April 16).
RETIREMENT SECURITY
Saving early is the No. 1 way to increase retirement security, the coalition says, citing the benefits of compounded interest and setting aside money on a regular basis.
Financial advisers have an important role in reminding clients, their clients' children and prospects that regular savings is the key to a better tomorrow and greater personal freedom.
Most Americans recognize the financial facts of current American life: Defined-benefit pension plans are largely history, Social Security benefits may be trimmed in the future and everyone is largely responsible for his or her own financial security in an economy that has put an increasing squeeze on the middle class.
While today's environment may be dark, the path to light starts with regular savings. Advisers can help illuminate the best ways to save — through 401(k) plans, IRAs and other tax-advantaged structures, for example — as well as investment vehicles that are most likely to produce the best results.
The more advisers beat the drum for economic freedom through saving, the better the results for clients and everyone else.
