Behavioral Economics: Relearning the Lost Art of Saving
The concept of “behavioral economics” may sound intimidating, even off-putting. But it’s an idea that boils down to one simple, important thing: relearning the lost art of saving money.
As private businesses, non-profit organizations and government agencies team up this week to recognize and promote America Saves Week, let’s take a moment to consider financial discipline. Americans know all too well the temptations inherent in an open, free-market system bolstered by the long-reaching arms of the Internet. Those temptations have taken a bite out of our collective savings.
A 2018 consumer survey estimates that 19 percent of Americans are not saving any money each year. And just 16 percent of survey respondents save more than 15 percent of their annual income. Reasons cited for this lack of saving varied from too little income to “life’s high expenses.”
America Saves Week was launched in 2007 by the non-profit Consumer Federation of America to help encourage and motivate lower- and middle-income families to save more. The campaign uses “behavioral economics” to teach consumers how to save. An example is the 30-40-30 plan: devote 30 percent of your tax refund to paying down debt, 40 percent to current use (living expenses, etc.) and 30 percent to savings or creating an emergency savings fund.
Many such tips are available through the America Saves Week campaign.
While it sounds great in theory, for those on a budget saving is a luxury. Taking the financial long view isn’t practical when you don’t know where the money is coming for next month’s rent or mortgage. For others, the discipline required to save has been overwhelmed by culture’s obsession with instant gratification. And with so much available at our fingertips overnight, it’s easy to succumb.
But even if through the tiniest of baby steps, developing the discipline of saving will pay dividends. Scratching an itch today is small consolation if you don’t have the means to address actual needs down the road.
Think about your savings this week. Are you prepared? Arkansas Federal can help. Our representatives can advise and help you reclaim the lost art of saving. Learn more about our savings and money market products.
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