There is a great deal of competition for a modern family’s income. Each month, the average family writes checks for rent or mortgage, childcare, and utilities. Couple those monthly expenses with outlays for transportation, food, clothing, tuition bills for children, student loan payments, and expenses for the care of aging parents, and families are left with limited discretionary income.
When deciding how to allocate discretionary income, families are faced with strong and persuasive messages that encourage them to spend their money. By comparison, families may receive little information and encouragement about saving. Knowing the “how” and “why” of saving can equip Americans with the tools to make wise choices when allocating what often are limited discretionary resources.
Part of building savings is protecting those savings through the use of insurance. When planning their saving and other financial matters, individuals should budget funds to insure their health, home, auto, and life. In this way, Americans can reduce the likelihood that one catastrophic event will wipe out a lifetime of saving.
In decades past, passbooks and piggy banks represented saving plans. Saving money is an activity that requires forethought, planning, specific activities, and responsibility, and is often undertaken without a known, specific “payoff” in the end. While spending is often seen as convenient and affordable, saving is an exercise in patience and tenacity with a view of achieving — or preparing for — a better future or paving the way to handle unexpected crises or emergencies.
To build wealth, simple lessons about saving are the most important to convey. Even a small amount of savings today can compound into resources for tomorrow. Such resources can provide the financial security and flexibility to handle unexpected events, while simultaneously offering the means for meeting future financial needs and planning.
In their efforts to save more, Americans should use the full spectrum of available savings products and tools. Savings tools today are far more diverse than just the passbooks and piggy banks of past decades. As the public and private sectors continue to innovate to meet the growing and diverse financial needs of the nation, saving can be both convenient and affordable.
Read more in the National Strategy for Financial Literacy.