Federal Reserve Chairman Ben Bernanke is clearly winning his war against savers as the freakishly low interest rates mandated by the central bank combined with a weak economy here in the U.S. are making it either impracticable or impossible for many Americans to maintain even a tiny amount of cash set aside for a rainy day.
According to a survey by Bankrate.come that included the graphic to the right, a full one-quarter of Americans now have more credit card debt than emergency savings which, when you think about it, shouldn’t be too surprising.
But, what was surprising (at least to me) was that a full 30 percent of those earning $75,000 or more could not say that they have more savings than credit card debt and 36 percent of college grads were characterized the same way.
One could make allowances for the avalanche of zero interest rate offers from credit card companies and how recent college grads have been having a tough time in the current economy, but still, these numbers seem quite high.
As might be expected, for non-college grads and low wage earners, things are much worse with nearly two-thirds of the respondents saying they had less savings than credit card debt, but things seem to be deteriorating rapidly for the middle and upper-middle class.
Overall, just over half of Americans now have more emergency savings than credit card debt while another 21 percent either don’t know what they have or have neither.
When asked how they feel about their level of savings as compared to a year ago, only 14 percent said they were more comfortable while 38 percent said they were less comfortable.
Don’t look for any of these numbers to improve much in the years ahead – at least not until 2015 when the Fed’s low interest rate policy might finally come to an end.
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Hmm… I wonder if the answer isn’t driven as much by a poor question than anything else.
My family has plenty of savings — but they are mostly invested. I can get to the money quickly enough if I need it, and I can use a credit card for any big expense that is so immediate that I couldn’t wait a few days to sell a few investments.
So I have a continually rotating balance (paid weekly) on a card that I put all my day-to-day purchases on (rewards!). I also I have a little on a zero-percent rate card (it was a teaser from years ago that had no expiration — HA! Those were the days!). Between the two, I’d be very close to saying “my credit card debt is larger than my savings account” — and that’s even if I count what I have floating around in money market savings! On the other hand, I can wipe out all credit cards balances next week if needed. It just wouldn’t make financial sense.
My credit card is paid off in full every month. I can’t imagine doing anything else. Why on earth would you want to carry a balance?
When I was a kid I was taught why it’s necessary for us to have pain sensations. That was to protect your primary systems. For example, you lean against a hot object. Without pain you would suffer horrible burns and maybe die. With pain you instantly recoil before any serious damage is done.
Our government and culture have made it so that people are mostly made to feel immune from really serious pain. Various safety nets give them the false impression that nothing all that bad will happen if they don’t save for a rainy day. They take on obscene student debt amounts with a vague idea that somehow it will eventually be forgiven. We lower interest rates below inflation to encourage more borrowing and punish saving.
Actually, rather than eliminating pain, it’s closer to being on oxycontin all the time. It’s bad for you, but you feel good at the time so you keep doing it. And if you finally do crash, there’s some govn’t paid rehab center to go do, and lots and lots of sympathy.
I just read a story on a blog from a guy crowing about being rich, losing it all, then clawing his way out of that. His first step after being able to afford to rent a real home? Buying an RV and a boat. They never learn The guy was 6 months out of bankruptcy court and living in his old vacation cabin with no road access in winter.
Nothing will change till the consumption-culture does. Unfortunately that will probably take a massive long term depression and economic collapse. .