- The Washington Times - Tuesday, June 20, 2000

When it comes to financial planning, most Americans are optimists. They would rather live for the moment instead of save for the future.

"Laissez le bon temps roulez" the famous New Orleans slogan for "let's party" seems to be infecting the public's attitude about money. Given the past decade of low inflation, steady economic growth and abundant job opportunities, it seems difficult to imagine financial setbacks.

"People just aren't setting money aside for life-changing events that could deplete their resources," says Kevin Larson, an analyst with Lutheran Brotherhood, a Minneapolis-based group that sells financial services products to 1.2 million Lutherans in the United States. "The trend is quite alarming."

To gauge public attitudes about money, Lutheran Brotherhood commissions surveys on family finances three times a year. The most recent survey, conducted by New York-based Yankelovich Partners, found that 55 percent of families do not have a strategy for coping with a financial emergency.

The survey also found that families are not properly prepared to deal with the loss of a household income due to an injury or disability. The survey of 1,000 people found that families with incomes of about $75,000 a year were twice as likely to have set up a savings plan as households making less than $35,000 annually.

Those least likely to plan ahead: seniors age 65 or older and people in the 18-to-34 age group.

The biggest impediment to saving is the cultural focus on spending a trend captured in a separate Lutheran Brotherhood survey released in March that examined the relationship between emotions and money.

One-third of the survey respondents said they bought consumer goods to kill a bad mood. Also, 18 percent said they had trouble paying their bills after a spending binge.

"People are euphoric after buying something," says Nathan Dungan, vice president of brand development at Lutheran Brotherhood. "But when the emotions of consumerism collide with the realities of money management, the results can be devastating."

Boring as it may seem, saving doesn't get the attention it deserves. Why save when lotteries and lucky stock picks make it look as if anyone can become an overnight millionaire?

The odds are far more likely that households will face the costs of college education and long-term illness rather than win the lottery, financial planners say.

"I don't know whether people are banking on the fact that with the strong market maybe they can borrow today and save later," says Mr. Larson. "But this failure to prepare for financial events is a trend we're seeing."

The nation's low savings rate is well-documented in economic data. Americans saved only 0.7 percent of their after-tax personal income in April, according to the most recent data from the Commerce Department.

The savings rate is calculated on a monthly and annual basis by the agency's Bureau of Economic Analysis (www.bea.doc.gov/bea). The economic data looks at income from wages and salaries as well as "outlays" spending on consumer goods and taxes.

The savings rate was 1.1 percent in January and dropped to a record low of 0.3 percent in February. It isn't unusual for the savings rate to drop in the beginning of the year, when consumers are paying off bills from the holidays. Yet the overall savings trend is still on a downward slope. The savings rate was 3.7 percent in 1998 and fell to 2.4 percent in 1999.

Meanwhile, plenty of life-changing events can push families to the brink of serious debt. Respondents to the Lutheran Brotherhood survey identified their biggest debt triggers:

• A serious personal injury or disability 10 percent.

• A child's college education 9 percent.

• A divorce 9 percent.

• The birth or adoption of a child 5 percent.

• Assisted-living or in-home care of an elderly relative 4 percent.

• A wedding 3 percent.

A good savings plan requires mutual agreement on goals by husband and wife. Setting such goals is not something all couples are good at doing, according to the survey.

While 55 percent of the couples surveyed said they make financial decisions jointly, the remaining 45 percent couldn't agree on who is the boss.

Thirty-eight percent of husbands said they control the household finances, but only 24 percent of wives agreed. Also, 17 percent of wives said they make the bulk of financial decisions, but only 8 percent of husbands agreed.

Maybe no one is in charge.

Have a question on work or family finances? Get in touch with Anne Veigle at 202/636-3014 or e-mail ([email protected]).

More information


• "The Guide to Saving Money: 325 Valuable Tips That Will Help You Stretch Your Dollars," by David Logan Scott, Globe Pequot Press, 1996. The guide includes tips on saving in various situations, such as shopping and traveling.

• "Taking Charge of Your Financial Future," by Lawrence Lynn, Contemporary Books, 1998. This is a detailed but readable guide to understanding investments.

• "Making the Most of Your Money: Smart Ways to Create Wealth and Plan Your Finances in the Nineties," by Jane Bryant Quinn, Simon & Schuster, 1997. This is an excellent reference book to have on hand for all types of questions about finances.

On line

• The American Savings Education Council maintains a Web site (www.asec.org) that has ideas for saving money.

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