Savings in America
The concept or practice of personal savings has been lost among excesive spending for most Americans. According to Forbes, the American personal savings rate as a percentage of disposable income was negative 0.5 percent. Other industrialized nations, like France or Germany, have savings rates of 11.6 percent and 10.6 percent, respectively, while Japan can be proud of a savings rate of 6.7 percent.
Sophie Beckmann told Forbes, “The savings situation in this country is dire, as people are not adding to their savings in the way they should be. People are setting their priorities where savings are not high on the list.” Beckmann is a Financial Planning Specialist at A.G. Edwards investment brokerage firm.
Americans seem to spend too much and spend money they do not have, as well. Forbes reports that Americans spend the equivalent of $7,200 per household in revolving credit. In April, revolving credit card debt hit $807 billion, according to the Federal Reserve.
A.G. Edwards’ second annual Nest Egg Index has ranked the top 500 markets based on the investing and personal savings performance of residents in those areas. According to Forbes, the index looked at 934 core-based statistical areas defined by the U.S. Census Bureau and examines factors such as, cost of living; employment rates; household incomes; home ownership and home values; levels of mortgage and personal debt; propensity to save and invest; participation in 401(k) and pension plans; and net worth. Considering a national average of 100 points, the top ten cities in the Nest Egg Index are:
- Los Alamos, N.M., with a rating of 134.4 and strengths including household income, net worth and pension plan participation.
- Fairfield County, Conn., with a rating of 126.2 and strengths including investing propensity, housing value and household income.
- San Jose, Calif., with a rating of 125.9 and strengths including housing value, household income and debt level.
- Torrington, Conn., with a rating of 120.9 and strengths including savings propensity, investing propensity and net worth.
- Minneapolis-St. Paul, Minn., with a rating of 117.8 and strengths including 401(k) plan participation, pension plan participation and home ownership.
- Barnstable Town, Mass., with a rating of 117.7 and strengths including debt level, net worth, and investing propensity.
- Holland-Grand Haven, Mich., with a rating of 117.1 and strengths including 401(k) plan participation, pension plan participation and investing propensity]
- Washington, D.C.-Northern Va., with a rating of 117.1 and strengths including household income, net worth, investing propensity and debt level.
- San Francisco-Oakland, Calif., with a rating of 116.4 and strengths including housing value, household income and debt level.
- Edwards, Colo., with a rating of 116.2 and strengths including household income, 401(k) plan participation and pension plan participation.
According to Forbes, the top five states in their rating order are:
- New Jersey (114.55)
- Connecticut (114.37)
- Minnesota (113.46)
- Maryland (112.28)
- Massachusetts (111.77)
Americans might be spenders, but they also have opportunities to save using several credit cards that have high yield savings accounts attached to them. Several of these credit cards with available savings plans include:
- American Express® offers their One® Card where American Express will contribute a full 1 percent of card purchases directly into an FDIC-insured high-yield savings account. Their web site reports that the Savings Acceleratorsm account is currently accruing an annual percentage yield of 5 percent, although a variable rate goes into effective on October 1, 2006.
- MBNA America Bank® offers the Baby Mint College Savings credit card that does not offer a direct saving plan but does offer a 1 percent rebate on every purchase made without restrictions on where used and a 7 percent rebate when shopping at participating merchants.
- Chase® offers their Freedomsm Card that earns 3 percent back for every $1 spent at qualified grocery stores, gas stations and quick service restaurants and 1 percent cash back for every $1 spent in all other businesses.
Spenders still have the opportunity to bank with their credit card companies. Some online banks also offer direct banking plans. Several of these opportunities are:
- Capital One® offers direct banking with a high yield money market accruing 4.80 percent interest. Online account access is also available, according to their web site.
- Citibank® offers their e-Savings Account with free Citibank EZ Checking currently accumulating interest at 5 percent, according to their web site.
- ING, one of the largest banking organizations in the world, offers the ING Direct Save Your Money® Orange Savings Account, Orange CD, Orange Mortgage and Orange Investment Accounts, according to their web site.
The Nest Egg Index is a snapshot of areas in these United States for more than 90 percent of the population, according to A.G. Edwards. This comprehensive evaluation of people’s saving and investing habits may help others realize their situations and turn their own savings rate around.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.