1. Redux: About Half Have 3 Months’ Expenses Saved

    We just keep coming back to the same dismal stats on savings, over and over again. This time, the 2014 Scorecard from the Corporation for Enterprise Development (CFED) informs us that, among other tidbits, 44 percent of us have less than three months’ worth of savings tucked away.

    CFED: 2014 Assets and Opportunity Scorecard

    The figures aren’t far off from those released in June of 2013 in a similar report from U.S. News. We hit the same savings ballpark in an Allstate survey, too.

    From a summary article:

    Nearly half (44%) of households in the United States are “liquid asset poor,” meaning they have less than three months’ worth of savings — conservatively measured as $5,887 for a family of four, or three times monthly income at the poverty level.

    I’m not sure what world these folks live in, but $5,887 doesn’t seem to be anywhere close to a reasonable measurement for a three-month cushion for a family of four. Which suggests to me that the figures are, in fact, really worse than what’s reported here.

    CFED also says that one quarter (25%) of middle class households (those earning $56,113 to $91,356 annually) have less than three months of savings. In a related note, they divulge, about 56 percent of us have subprime credit scores. Also, in 2012, the average college debt level for graduates was $29,400.

    You can grab a PDF copy of the 2014 report — chock full of fancy graphs, graphics, and (of course) admonitions for government-policy intervention — right here.




     

     

  2. Annual Holiday Missive

    It’s that time of year again — the time where I wish my readers a great holiday season, and suggest that those who aren’t already doing it should make Christmas gift-giving a regular monthly bill. In other words, save up for it throughout the entire year.

    Now, we save up for gifts (all of them — not just Christmas) every month inside our regular Freedom Account saving. We save up for gift-giving the same way we save up for our six-month car-insurance payments. I know about how much we spend each year on gifts, so I just take that amount, divide by 12, and set aside that much each month … same as we do for every other non-monthly, recurring bill.

    For me personally, I cannot emphasize enough how much less stressful it’s made holiday budgeting and spending.




     

     

  3. Wee Little Status Update

    For those three or four folks who may be wondering what’s happened at this here money blog, well, the answer is: Not much.

    If I had any gripping tales of financial abandon to tell, I’d do it. I scan the news every couple of days to see what’s going on in the world of personal finance; certainly nothing life-changing has popped up. (Well, ObamaCare is about to kick in. That ought to be good for a few million laughs. Or tears.)

    The Federal Reserve is still doing its best to ensure that “saving” remains a four-letter word, savers must be well and duly punished, and stock markets cannot be allowed to drop more than a few percent at a clip. Nothing new there. It’s what happens when you have an economy that “grows” only when debt expands and risk-asset prices rise. No “growth” if people/entities/governments don’t keep taking on more and more debt and risk. What could possibly go wrong?

    On the personal front, our family savings got about $20k lighter in September. That’s what getting a new roof, new siding and windows throughout, and gutter installation will do to you. Until this month, the largest check I’d ever written was for our home central A/C system back in 2007. I can tell you that the A/C payment felt like a sneeze compared to the exterior repairs. However, we had well more than enough liquid savings to cover it, and I’m mighty thankful for that. (‘Tis also nice to pull up in your driveway each day after work and NOT cringe at the outward appearance of your home. The old homestead looks pretty nice now, if I do say so myself.)

    And that’s my little roundup, for now. Back to your regularly-scheduled nap, kids!




     

     

  4. Less Than Half Have 3 Months’ Expenses Saved

    Fresh off the press, a couple of articles emphasizing Americans’ strong penchant for saving precisely squat:

    US News: More Than 1/4 Have No E-Fund

    And a related article:

    Bankrate: Short on Savings, Americans Still Feeling Positive

    No surprises here for followers of this blog: When you punish people for saving, you’re going to get less saving. When you reward people for blowing through every penny that hits the door, and then some, you’re going to have a nation of broke people.

    But hey — as Bankrate tells us, “Americans are feeling very secure about their personal finances.” This, even though “… nearly half of those surveyed have less than three months’ worth of expenses, or nothing at all, in emergency savings.”

    I’m not sure what sort of “security” these folks are aiming for, but it’s apparently one I’ve always tried to avoid.




     

     

  5. Employers Turn Small Loans Into Savings

    Now here’s a PBS video which I think illustrates at once a horrific concept, and a fabulous one:

    PBS: Savings and Loans: Employer Plans Encourage Saving (~12 minutes)

    What’s horrific? People borrowing money from their employers. Now, if your employer’s a bank, then hey, fine, whatever; it’s what they do. When all hell blows up on them, taxpayers pick up the tab, and no one much gives a crap after a year or so. (Especially if the stock market is tagging record highs.)

    Outside of that, if your employer isn’t a bank or similar, then they shouldn’t be in the business of making loans. Just my opinion. That’s what banks, credit unions, pawn shops, check-advancers, and your neighborhood loan shark are for. Though of course it’s the employers’ money, and they can do with it what they want. (In the video, the employer is more “facilitating” the loans than they are “making” them. The loans are actually made by local credit unions, with interest rates in the 17 percent range.)

    In my modest personal experience, watching how these sorts of employer-as-lender policies are treated in workplaces, I’ve found that even when these loans turn out well, they tend to be used by the same folks again, and again, and again. Maybe I’m wrong, but I don’t think that’s the goal.

    The Part I Applaud

    In the video, we’re told that the employers in question made an interesting policy tweak: Loan payments are withheld directly from employees’ paychecks over time, and once the loans are paid back, the default option is for employees to continue having those same amounts withheld, but deposited into savings accounts so that they begin building savings. Employees can opt out of this “forced” Baby Step #1, of course, but most (we’re told) do not.

    This part of the plan, I adore.

    By the time the loan is paid back, I’d imagine that you as employee would have at least a decent chance of realizing that you really COULD live without that small chunk of your paycheck. It wasn’t so hard, was it? Lo and behold, the saving you thought you could NEVER EVER do turns out to be achievable — cold, hard cash in a bank account. When the next little emergency pops up, perhaps you’ve got it covered.

    (Though I’d argue that the peace of mind savings provides is probably worth as much as the actual money itself. And the less someone has experienced actual “saving,” the more important that peace of mind is.)

    Given the context that’s presented in the PBS video, I might be willing to revisit my “Employers shouldn’t be making loans” stance. I could see where both parties really could benefit from such an arrangement.




     

     

  6. Get More Retirement Savings, Cuz Congress Wants It

    Couple of saving-related news stories which hit my inbox this afternoon:

    EBRI: 2013 Retirement Confidence Survey Results

    EBRI’s 2013 survey tells us that half of workers reported having $25k or less in total savings and investments (not counting home equity and any defined-benefit plans). Twenty-eight percent have less than $1,000.

    FA Mag: Congress May Act to Stem Outflows from 401k Plans

    That’s right, America: Not only do you not have jack squat in your retirement plan accounts, but what you do have, isn’t really yours, and won’t be until Congress says it’s okay for you to have it.

    Carry on.




     

     

  7. Survey: People Have No Savings

    No surprise here, I guess: A survey by credit-comparison website CreditDonkey found that 41 percent of respondents have less than $500 of savings at any given time.

    CreditDonkey.com: Nearly Half Have No Emergency Savings

    The site surveyed 1,100 folks. Of that, 41 percent said they have less than $500 in emergency funds or other liquid savings. These findings aren’t far off from a similar study done by the Wall Street Journal back in 2011, which reported that half of us couldn’t come up with $2,000 within a few weeks if necessary.

    From the CreditDonkey article:

    It’s not what you may think: This 41% is made up not only of people living at or below the poverty line. They are also dual-income earners with nice homes, nice cars, nice toys, a 401K retirement savings plan, big mortgages. and big credit card bills. But if they ever get into a bind and need some quick cash – say, because of a car breakdown or an unexpected doctor visit – they don’t have it.

    What’d they expect? Everywhere we turn, the Powers That Be instruct us to “Spend it all,” lest we get left behind our neighbors who are already doing their part by living entirely for today. And that’s regardless of income level. The good news is that our government and all related entities are working diligently to make sure everything we need (food, energy, education, and all that) gets cheaper by the day. (You believe that, right?)

    Ah, no matter. We’ll just worry about the future when it gets here.




     

     

  8. Paradox of Thrift

    Don’t know how I managed to miss this treat, but I did:

    National Post: 93-Year-Old Threatens American Capitalism

    I remember reading something about Ms. Veitch and her still-chugging-along 1964 Mercury Comet recently. But whatever it was that I read, I certainly don’t remember her being presented as all that’s wrong with the American economy. Because that is, you know, the tongue-in-cheek gist of the article above.

    I feel quite confident that my beloved America is in zero danger of becoming a nation of Veitchian monsters. Holy crap, no. We love our plasma TVs, McMansions, and our lane-cramming SUVs. We thrive on $10, triple-decker, bacon-and-bleu-cheese-cheeseburgers. (Dangit. What’s for lunch, anyway?)

    And debt? Oh, we loves our debt. In fact, debt is a lot like The Force. It surrounds us, binds us. Debt is the ever-increasing glue which holds us all together. Even when we don’t have any money, we can keep spending money, because we can always get debt. Always. Well, except for 2007 and 2008 and part of 2009. Then we couldn’t get debt. And you saw how that went, didn’t you?

    Oh, but Dark Siders, like Veitch, who save money and make full use of all their assets and take advantage of the deals and guarantee presented to them — well, these people are Communists and apparently don’t believe in the almighty goodness of Debt, Debt, and More Debt.

    So our greatest economic enemy drives a ’64 Mercury Comet. Who knew?




     

     

  9. Will I Stay With ING Capital Direct One?

    I’ve not made mention of Capital One’s purchase of ING Direct USA yet in this blog, mostly because I figured every other money blogger out there had probably handled my bitching for me.

    My suspicions were largely affirmed when I read this dispatch from Ad Age:

    AdAge: Can CapOne Persuade ING Customers to Stay?

    I disliked — nay, despised — the idea of my beloved ING Direct accounts falling under the stead of Capital One. Apparently, I wasn’t the only one:

    Reactions to the $9.2 billion acquisition, which closed in mid-February, on social-media sites like Twitter from ING Direct customers were mostly negative, with many announcing they had already left ING Direct or were looking for alternatives.

    What do I have against Capital One? Nothing tangible, really. They’ve not shafted me in the past on credit-card rates or anything. But, to be fair, it isn’t like I’ve done a TARP-load of business with them, either. Ahem.

    Where Do We Go From Here?

    I don’t know why, really, but even though my Electric Orange checking account screen still says ING Direct, just logging-in now feels … I dunno … dirty.

    ING Direct’s Orange Savings account was my first banking love, as it was for so many online savers. The idea of online-only savings and checking accounts never occurred to me until another blogger introduced me to ING Direct, and what I saw, I liked, right off the bat. ING Direct was different. They didn’t throw credit-card offers in my face every twelve minutes; they actually paid above-market rates on savings; they didn’t barrage me with ads for Christmas loans and nothing-down mortgages. (I suppose it should’ve been obvious, even then, that they were short-termers.)

    All those positives will, I suspect, disappear in time, now that ownership has been, uh, reconfigured. Cap One will no doubt do everything it can to monetize those ING accounts. This hasn’t happened yet, of course, but just thinking about it saddens me. I really, really liked ING Direct.

    When ING Direct came along, I actually thought maybe savers (read: tightwads) and banks could get along together okay — maybe even have something sort of “cool” going on, with any luck — but, as so often happens, reality has now set in. Savers don’t make money for banks; borrowers do. And so Capital One will plunge ahead with turning what’s left of ING’s savers into Capital One’s borrowers. Or, failing that, at least turn them into fee-payers.

    We all know it’s coming.




     

     

  10. So Why Save?

    Talk about fantastic news: My email inbox showered me with a couple of interest-rate notices this past week … the same sort of notices that have been so pervasive for the last several years:

    Dear Affiliate,

    ING DIRECT’s Orange Savings Account and Kids Savings Account rate has changed to 0.80%.

    ING DIRECT’s Business Savings Account rate has changed to 0.50%.

    Electric Orange Checking Account rates have changed…

    While ING’s savings rates have been below 1% for a while now, and consistently dropping to new lows (for them), the update that really smarted came courtesy of my preferred credit union. Their rewards checking account had been paying me 4.38% ever since I’d signed up back in August of 2010. The new rate as of January 1, 2012?

    Try 3.38%.

    While that’s still a pretty nice rate, relatively speaking, that doesn’t mean I have to be happy about the drop in yield. This is “rewards checking,” after all, where I actually have to expend some effort — like using a debit card at least 12 times per month, which I’d otherwise never do — to earn that rate. And even then, it’s only on the first $15,000 of deposited funds.

    It’s not necessarily the pure dollar figures that tick me off, either. Where my dividends in this account had been running in the $50 area each month, I’ll now be getting somewhere in the vicinity of $42. Eight bucks less per month? No big whoop.

    Rather, what gripes me is the fact that rates are being anchored to the floor, and pushed ever lower, because there’s so much STUPID (yeah, that’s a noun) in the system that allowing rates to rise to a market-clearing level would apparently bring about financial chaos. I mean, heaven forbid true risk get priced in anywhere. Financially-spotty paper assets getting repriced to true, “non-easy money” values? Lord, no! Insanity! Why, think of the children!

    (At this point, Watson, if you’ve surmised that I’m not a fan of the Federal Reserve, you’d be correct.)

    So Why Save?

    It’s quite obvious at this point that, while their PR firms say otherwise, the absolute last thing that The Powers That Be want us middle-class folk to do is save our money. (Neat corollary: One of the reasons we inhabit the economic muck of today is that no one has been saving, really saving, for decades. And if any of us were to do something crazy and start saving now on any kind of sizeable scale, well, we’d be in the soup. Since no one has been saving for years, and instead has been taking on “cheap” debt like there’s no tomorrow, we certainly can’t afford to save now. See how it all makes perfect sense?)

    But if you’re me, and you like to be able to sleep at night, you save anyway.

    You save, because somewhere down the line you’re going to need a new truck, and paying interest on top of the already-silly prices on cars just wouldn’t be kosher.

    You save, because while you replaced your central heat/air system just a few years ago, experience tells you that Murphy likes to show up unannounced and make roadkill of pretty much any four- or five-digit home repair item he can find.

    You save, because deep inside, there’s that vindictive inner self who believes that cramming hundred-dollar bills into a bank bag stored in your home safe means that somewhere, a banker or Federal Reserve governor breaks down in tears. (Or, if you prefer, with each crisp Benjamin you take out of the system, a hefty .0000000137 jobs are destroyed. I don’t have any evidence to back that up, of course, but then my inner self isn’t actually a stickler for facts, either.)

    So go ahead, Federal Reserve, and keep massaging those rates down, down, down. Our beloved banks will have choice but to follow suit. And keep huffing and puffing to prop asset prices up, up, up. There won’t be any negative repercussions to any of this; no, of course there won’t. History has shown us, time and again, that there never are. It always works out well.

    For somebody.

    Just never the savers.