Financial Foundations



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Saving Money Is A Hard Sell

Why is it so hard to save money?

I have asked myself that question for years. Now I have an answer.

It's so hard to save, because it's so easy to spend! Also, spending is much more fun.We can even spend money that we don't have.Recently my 11-year-old son Christopher received a personal invitation for a Platinum American Express credit card. Of course he wouldn't qualify, being a minor, but it shows just how aggressive the plastic currency industry really is. They try to get everyone to spend.
I've even heard of a friend who received a credit card application made out to his cat!

Saving skills must be developed. Like playing piano, they need to be learned, practised and polished, or they will be regretfully lost. But plastic is not nearly as slick as electronic buying through the Internet. The Internet makes shopping both easier and faster.On the Net (World Wide Web), we can purchase almost anything from anywhere without ever leaving our home or opening our wallet. All we need are the right numbers. Shopping convenience reigns. Savings skills are on a decline. Over the last 10 years, the stock market has performed well, making it less of a need to save, since investments are providing good returns.Banks certainly don't encourage saving with their 1/4 per cent per year interest rate on most savings accounts.

Even the tax system is hostile towards saving as interest income is taxed at the full marginal rate.This means that for $1000 in an account, the interest will be $2.50 per year. After taxes, it would be only about $1.50. Not much incentive, is it?

The fact is we are riding a period of prosperity and the saving skill is being lost. Yes, saving is a skill and it must be learned.

Consumption, like eating, comes naturally. It is not a skill.

For those of us who want to increase our saving skills, here are some helpful reminders:

  • Recognize that we live in an anti,savings society. There is enormous pressure to spend! Savers swim upstream.
  • Set savings goals -- for example -- a car, a fridge, a home renovation or a vacation.
  • Save as funds come in. If paid weekly, then save weekly. If paid monthly, then set aside something every month.
  • Consider subscribing to a magazine such as the Cheapskate Monthly (P.O. Box 2135, Paramount, CA, 90723-8135, U.S.A.) or Consumer Reports (P.O. Box 51166, Boulder, CO, 80323- 1166, U.S.A.) to fine tune your spending habits.
  • Use the OOSOOM technique. Keep your savings Out Of Sight and Out Of Mind. This is the exact opposite tactic that advertisers use to get us to spend money.
  • Forget traditional banks for saving. A Trimark Interest Account and President's Choice Financial Interest First Savings Account currently offer about 4.25 per cent inureest. That is on any amount for any length of time. They allow you to transfer money back to your bank/checking account by phone. And it takes only one or two business days.
  • For longer-term savings (more than one year in length), consider the Guardian Monthly High Income Fund which yields about 7 per cent after tax.

I am now grateful for the savings skills imparted to me by my parents who emigrated from Eastern Europe in the late 1950s.

Saving skills must be developed. Like playing piano, they need to be learned, practised and polished, or they will be regretfully lost.

Save On!