Since 2008, U.S. household debt has rebounded to new highs. In the first quarter of 2018, personal consumer debt hit $13.2 trillion. We still borrow more than we save. Between 1960 and 1984, the savings rate for U.S. households never fell below 8%. However, as of December 2017, the personal savings rate hovered around a paltry 2.4%. The lessons of the 2008 financial crisis seem to have gone unheeded.
Wage stagnation has made it harder for families to save, however consumer behavior is a contributing factor. In 2014, when low gas prices were saving Americans money at the pump, JPMorgan Chase reported that their credit card holders spent 73% of the savings- with 18% of that being spent on restaurants. Certainly, advertising has become ultra effective at convincing Americans to open their wallets.
As reported by Financial Advisor Magazine, most of the top 12 financially-related questions on Google are concerned with borrowing money, not saving it. In other words, “How do I get my hands on cash today?” as opposed to “How do I grow my money for the future?” which would be the focus of a wealth accumulation strategy.
The top questions are as follows:
11. What is a foreclosure?
10. What is debt consolidation?
9. What is a cash advance?
8. What are interest rates?
7. What is compounding interest?
6. What is a credit union?
5. What is a 401(k)?
4. How do payday loans work?
3. What is a car loan?
2. What is a mortgage?
1. How do student loans work?
We are glad to see that “compounding interest” is a question on the list, as we believe that is one of the most important wealth management concepts for people to understand. Americans need to know that starting a 401(k), Roth IRA, or Traditional IRA at the beginning of adulthood (by their early 20s) will grow their money faster due to compounding interest, and will make it easier for them to retire at a more desirable age and maintain their pre-retirement lifestyle.
If you have any questions on how to save more of your money and take advantage of important wealth accumulation steps, please contact us at firstname.lastname@example.org or call us at 515-557-1860. We are a fiduciary based registered investment advisory firm that offers investment management, wealth management, and financial planning services. Give us a call!