Americans aim to boost savings
Americans didn't put enough money away in our savings accounts last year. But what else is new?
Well, one thing that's new is that it seems like many have come around to the realization that they can no longer continue making their savings accounts balances an afterthought.
A study by Principal Financial Group recently found that nearly one in five said their biggest mistake in 2011 was not putting enough away in savings accounts, money market accounts or a certificate of deposit. As a result, more than 25 percent have made saving more and paying off our credit cards our top financial priority for the coming year.
That's a good thing, because the nation's ongoing financial worries -- including concerns about higher taxes, shrinking Social Security and high unemployment -- is taking a toll on those over the age of 50. More than half are feeling higher stress levels because of market volatility and the threat of a double-dip recession.
For those feeling anxious, here's what to do about it:
- Save more. Our nation's 3.5 percent savings rate is nowhere near enough, so Americans are going to be very specific about their goals for the coming year. It's easy to stray from a plan to simply "save more," but what if the plan is to save, specifically, $2,500 by the end of 2012? That's doable and measurable -- and more likely to happen than some vague aspiration.
- Pay yourself first. That's right; save before you spend, rather than after.
- Don't make risky investments in an effort to make up for an inadequate savings rate. Investors probably can't get the high asset growth rates they enjoyed in the 1990s anymore, so they you need to make sure your investments are safely diversified in things like CDs, money market accounts, savings accounts and other investments.
- Don't count on Social Security. You should expect it -- you invested in it and you have it coming -- but don't expect it to cover all of your retirement expenses. It was always meant to supplement savings anyway.
- Don't resign yourself to working until you're 80. As the Atlantic recently pointed out, employers these days are not keeping on older workers when younger, more flexible workers are available at half the price.
But perhaps most importantly, you should strive to be happier. Why? Because happy people save more money. They are also less likely to have debts, and because they are looking forward to retirement, they are more likely to save for it.