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Why is it so Hard to Save?

Written by Nickel - 23 Comments

I just ran across an interesting article in the latest issue of Reader’s Digest. It’s by Jean Chatzky and, in it, she talks why Americans are so bad at saving money. So what’s the problem?

Why are people scaling back on their savings and/or borrowing against home equity and their retirement accounts to fuel their consumeristic tendencies? We know that saving is good for us, so why don’t we do it? Chatzky offers up three main reasons.

One: Saving today is harder. As prices increase, we have less and less “disposable” income that can be directed towards savings goals. This is especially hard right now given that the runup in gas and food prices has occurred in the face of household income levels that have been holding steady for the past five or so years.

Two: Credit became too accessible. According to Chatzky, it’s been far too easy to get your hands on money to spend. For example, the rule of thumb for an “acceptable” debt load has steadily increased from 28% to 33% to 36% to as high as 50+% of your total monthly income. Why? Because housing prices were going up, and lenders still wanted your business. The problem is, the more you owe, the less you can save.

Three: Saving is, was, and always will be no fun. Choosing to save almost always means opting for delayed gratification, and delayed gratification isn’t very much fun. According to Chatzky, “Things way off in the future — like retirement — don’t jostle the pleasure center [of your brain] much at all.”

My thoughts:

Inflation is undoubtedly a problem, but I also think that some of this needs to be laid at the feet of consumer decision making. Buying that giant house way out in the distant suburbs, and then opting for a car that gets crappy mileage certainly didn’t help the situation.

The same goes for the credit issue. Sure, there’s been lots of easy credit, but nobody forced people to use it. I know that this sounds harsh, but it’s hard to feel too sorry for someone when they willingly put themselves in a hole.

As for the third issue, I wholeheartedly agree. I’ve written recently about the parallels between personal finance and physical fitness, and this is yet another example. It’s hard to do the right thing when not doing the right thing is so much more agreeable.

It takes self discipline, but once you get over the hump and make a habit out of saving money, exercising, etc., you’ll soon find that slacking off isn’t nearly as enjoyable as it once was.

Published on June 10th, 2008
Modified on July 24th, 2008 - 23 Comments
Filed under: Saving & Investing

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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23 Responses to “Why is it so Hard to Save?”

  1. 1
    Sam Says:

    I read that article myself.

    (1)I agree with the author that ‘fixed’ costs like health insurance, college expenses, housing are more expensive. Yes, we all have some control over the actual price we pay for the above but overall they cost more. I pay $3900 a year for health insurance (just my chunk) that is up a great deal in just 5 years.

    (2) Credit is too easy. We have been ‘off’ credit for a year now (we still each have a credit card but we don’t use them for day to day expenses, we use the CC for plane tickets, business expenses, etc.) and its still hard for us. Just this morning Mr. Sam was complaining that his problem with managing his money from paycheck to paycheck could be easily solved by a credit card. Its harder to live on ‘current’ money.

    (3) I disagree with this one, I think saving money is fun. I very much enjoy updating my networth and tracking my savings in my Excel charts.

  2. 2
    Eric Says:

    I had a conversation about this with my grandmother just the other day. There exists a large difference between generations that are currently here on earth. My grandmothers generation financially is so much different from my parents generation, which is so different from mine. I worry about my generation (Y) and the ones after mine. At 24 I have things on track. I actually have more in savings and a 401k then most people I know who are 30+. The major problem is, as you said no one has put a gun to anyones head it’s the fact that Americans can not seem to demonstrate any self control. Somewhere along the lines everyone forgot about the depression and since WWII it’s been a party. When will the champagne dry up?

    I watched a lady in her 30’s the other day at target. She was holding her child which could not have been much older than my son. She bought a bunch of things and when she went to pay her card was declined. I watched in horror as she pulled another card out, shrugged it off and then said to her baby “Here let’s try this one.” That card was also declined. This process went on for 7 cards and I just sat in horror as I took another account of her items. With the exception of a few items she really could have went without everything in her cart. But the sad part is the underlying principles she is subconciously implanting into her daughter. So the point of that story is, even with current oil prices, increases of everything and this little slump we are in with housing… I don’t think anyone will even learn from it. The party is temporarily on hold and the economy just went out for a beer run! People aren’t saving because they don’t want to or they don’t know how. Granted, there are a few people who financially can not save. But I watch as most of my friends, even after I lecture them each time run off each friday with their pay check and spend it by saturday evening. By Monday morning they have nothing to show for the week they just worked!

  3. 3
    Michael Says:

    Now I cannot say I agree with the “my thoughts” section of this article. Clearly the commentary is from someone who has lots of money…because it is out of touch with the realities I see and experience. People moved out to the distant suburbs because it was the only place to find an affordable place to live. Then they buy a car that will carry childern and groceries. As for credit…it was sold to consumers by companies who made it availble to anyone, and if the compaines didn’t make it so easy, many would not have gotten it.
    I don’t see how you can endlessly blame the consumer when it is the companies who sell for profit at all costs and only care about the bottom line, pay small raises to thier workers, and then cry when thier own mistakes cost them (Bear Stearns).
    The problem to me is not the person trying to make ends meet, it’s big business greed. and until those at the top feel what the everyday worker feels. then their won’t be any change. I hope more companies have troubles of thier own doing, that gas rises so high we as a country are forced to rethink our energy policies. Our troubles are not the consumer at all… the consumer has no choice but to eat, feed the kids, get to work, and pay for housing. It’s big greedy business and the insulated indifferent government that have gotten us into this mess, and it’s them who need to come up with a way out. Maybe both should consider doing the “right thing” for a change instead of thinking only of themselves.

  4. 4
    nickel Says:

    Michael: We have four kids. We need to move lots of people, groceries, etc. But we drive a minivan instead of a Suburban. As for living out in the ‘burbs, we’ve made this decision ourselves in the past, for the same reasons you described. But we didn’t buy a giant house. We bought one that was big enough for our family of six (2100 sq ft), not a ginormous McMansion.

    The problem in many cases isn’t that people can’t afford a house closer in. It’s that they can’t afford a 4000 sq ft house closer in, and for some reason they feel that they need that amount of space for their family of three.

    I’m not arguing that buying an affordable house is the problem. I’m saying that moving way out such that you can buy way more house than you really need is a major contributor. All that does is jack up your energy bills (plus prompt you to buy tons of excess belongings to fill the place up). Add to that a vehicle that gets 12 mpg and you’re looking at a pretty tough situation.

    “the consumer has no choice but to eat, feed the kids, get to work, and pay for housing.”

    I totally agree, and some amount of pain will be felt regardless. But there are choices that we can all make that will reduce the pain.

  5. 5
    Chad @ Sentient Money Says:

    I completely agree with the My Thoughts section.

    @ Michael
    - Amazingly 30 years ago people managed with out giant SUVs…it’s called a car. It they really were buying a these SUVs for room they would have bought a mini-van, which has more interior room.

    - People didn’t move to the suburbs because they couldn’t afford a house in the city. They moved to the suburbs because they couldn’t afford a big house in the city. Also, none of these people actually calculate the true cost of a house an hour outside of a city. It’s not nearly as affordable as people think.

    - I and many people I know had this easy credit available and didn’t use it, so the final blame has to go to the consumer. Admitedly the credit companies have to share the blame, but it’s more the consumer than the companies. Does the baby really care if 3 other babies wore it’s current clothes? The baby could care less if the clothes are from Baby GAP.

    - I couldn’t agree with you more on Bear Sterns.

  6. 6
    Debbie M Says:

    I disagree with these reasons. They may help, but I don’t see them as the main problems. Not like these:

    1) Talking about money is taboo. Yes, we learn math and reading in school, so we have all the tools we need. But we do not have that extra layer of conversations about how to handle various situations (except on personal finance blogs!). Yet we are all supposed to be magically fine with money. So, we don’t talk about it, we don’t give or receive advice, and we don’t even get punished socially for doing dumb things because it’s all secret. And no one wants to interfere or be interfered with.

    2) We have a culture of spending. We have a culture of “I deserve…” We have a culture where progress is good, so being on the cutting edge is good, so having the latest toy is good. We even have a culture where getting around the rules is admired. You could blame advertisers, but I really don’t know why advertising works so well.

    We also have higher expectations. And we have different options. Even if I decided I wouldn’t mind going without a full kitchen or sharing a dorm-like bathroom with my neighbors or having an outhouse in order to save money, those are not options.

    In fact “affordable housing” is now seen as something that only low-income folk should be allowed (qualified) to have and which must be subsidized. (Which means it’s not actually affordable.) My 1955 3/1 house with almost 1000 square feet is now worth about the same as some “affordable housing” less than a mile away that I don’t qualify for. And what if I wanted a one-bedroom, 600 square foot house since I am single? Impossible! (So I just get a roommate.)

    And if you ride a bike everywhere or get your clothes from garage sales and thrift stores, you’re seen as some kind of weirdo. Oh, people might even say, “I should do that,” but in the back of their minds, they’re thinking, “but I never could, because I am just not that sort of person.”

    3) Because of this culture of consumption, people don’t even realize what all their choices are. I met someone who didn’t know you could make popcorn in a pan. I’m only slowly learning what all kinds of things can be easily fixed.

    Just compare us to people who grew up during the Great Depression, who are more likely to err in the other direction (saving everything for a special occasion, but then nothing is ever special enough), and you’ll see big differences.

    I think objectively it’s actually much easier for us to save than for those older folks. First, we just plain have more money. Even poor people have TVs–color TVs, and these weren’t even invented in the Depression. Most anyone can get food (one exception is abused kids; another is people who refuse help from the system but really need it–and their kids).

    Second, we have more options for saving our money. Almost anyone can get a checking account with FDIC insurance (not available in the 1920s). Almost anyone can afford to invest in the stock market or buy government bonds. REITS even make it possible to invest in real estate in a fairly safe way.

    Sorry, it’s just not hard. It only seems hard.

  7. 7
    Holly Says:

    I can say, from personal experience, some of us learned too late to be frugal and always spend less than you earn.

    We may WANT more things, but we don’t NEED things.

    In a world where medical, food and fuel prices are out of reach for the average family we are still not practicing frugality.

    My husband and I just turned 60 and had always believed we would both be retired in our early 60’s. We managed to buy an apartment building and pay off the mortgage thinking we would have the rental income to supplement our retirement. We are now selling that building as the higher costs of food, fuel and taxes makes keeping it more work than the income values us.

    We did not save enough for retirement, and although we live very frugally now….it’s far too late to make up for years of not putting $$$$ away.

    I implore younger people to realize you don’t need every new product, that clothing can be worn until it’s worn and cars are just to get you from one place to another.

    You can walk more, save more, garden, put on a sweater instead of the heat. Think about the future….if you continue living the way you live you WILL have less than you have now. I promise you that.

  8. 8
    Funny about Money Says:

    Oh dear. I must be nuttier than a fruitcake: I think saving is great fun!

    It’s like a game. How much can I slip into X, Y, or Z account or mutual fund without crimping my style?

    There’s not only the challenge of setting money aside each month while maintaining a pleasant lifestyle and paying all the bills on time, it’s also very satisfying to see a savings account grow from $50 to a couple thousand bucks over the course of a few months.

    Okay, okay, it’s not as much fun as a Maserati. But maybe after a bit the savings account will buy me one of those. :-)

  9. 9
    Money Millionaire Says:

    I’ve found that saving is indeed fun. I think of it as gaining points in a video game. If you want to have a high score, you can’t be giving away points, right?

  10. 10
    cady Says:

    I just want to point out one thing about our grandparents vs our generation. They didn’t have any credit temptations to resist. They had no credit cards. They had lay-away but you couldn’t get your hands on the stuff until you pay for it in full and they had far far far less stuff to desire on display around them. Furthermore you were generally paid in cash. The way that our money is not visible to us makes it easier to waste. I get direct deposit and I pay bills electronically. I hardly ever handle cash. My grandmother had her cash scattered all around her house and yard. It is easier to set some aside if you can see all you have in one glance. Also you couldn’t use it if you didn’t have it on you. ATMs are everywhere and I can get to my money at all times. Also there are far more things to tempt us and we are still finally mere mortals. In the same way people that have quit smoking can be obnoxiously self-righteous about it, ex-spenders need to give people in the trap a break. It isn’t that easy to quit. Or to even see how to begin. (I’ll add that my parents are in their late 80s so my grandparents were born in 1900)

  11. 11
    Independent George Says:

    The way that our money is not visible to us makes it easier to waste. I get direct deposit and I pay bills electronically.

    I’ve seen others make this argument before, but I remain unconvinced. I’ve found it easier to save, not harder, since going all-electronic. Bills are paid and balances are moved into savings before I have an opportunity to spend it. There’s never any ambiguity as to the exact balance in my accounts; I automatically know exactly how much money I have available to me.

    Also, I still think that cheap credit remains a good thing. It’s a mere tool; like anything else, it all depends on the user. Between 0% deals and reward points, it basically amounts to banks paying me for the privilege of spending their money.

  12. 12
    SingleGuyMoney Says:

    I’m another one that thinks saving is fun. I love watching my balance grow.

  13. 13
    Scott Says:

    People should be more focused on saving during economic good times than in bad. Interest rates were much better for savers 3 or 4 years ago than they are today, and there’s more surplus income to direct to savings goals. But saving during the good times requires discipline and a pessimistic attitude, both of which a large number people lacked during the last housing bubble.

  14. 14
    Dollar Frugal Says:

    1. I disagree. If you figure out ways to make more money, you will have more disposable income. Also, studies will show that we have more disposable income. Statistics are always chosen for their lending to one’s cause.
    2. Simple – don’t let credit be accessible!
    3. Saving is fun, if you keep it fresh. Reading blogs is one way to stay motivated.

  15. 15
    kitty Says:

    Why are Americans blame accessibility of credit on their own problems? Why is having the ability to borrow money is such a temptation? Haven’t you learned in childhood that if you borrow money you always have to pay it back? Because if you had learned this basic rule, you’ll understand the difference between borrowed money and spending money. I.e. if you use credit cards, you’ll still have to pay your own money eventually and it is entirely up to you if you pay exactly as much as you spend or if you pay a lot more. So why are you tempted to spend more than you can repay. To me it is a lack of maral principles, not lack of financial know-how.

    I have credit cards in my purse and so do my parents. I am not at all tempted to use it because I understand that I’ll still be spending my money, so it makes no difference to me.

    My parents got their first credit card in early 80s, just a couple of years after we had immigrated from the Soviet Union. My father was already 48 when we came to the US, my mother 43, and they spoke no English and had no money when they came. My father was earning very little since his engineering degree was pretty useless without English. My mother couldn’t find a job for two years. Still, by the time they were able to get their first credit card, they managed to save a little money. Guess what. Their lack of knowledge of English didn’t prevent them from figuring out that credit card bills have to be paid in full by the due date or else they’ll pay interest, and my parents understand the value of money too much to just throw it away on interest.

    if you ride a bike everywhere or get your clothes from garage sales and thrift stores, you’re seen as some kind of weirdo. Oh, people might even say, “I should do that,” but in the back of their minds, they’re thinking, “but I never could, because I am just not that sort of person.”
    Not true. I work for a Fortune 500 company’s research center with many highly compensated engineers and scientists. There are some people here to ride a bike to work. These people aren’t considered weirdos, they are admired for both saving gas, helping the environment and getting some exercise. I earn 6 digits, and if I had lived a little closer, I’d consider it too. I car pool, my manager car pools, one guy in my group works some days a week from home. We have 5 microwaves in our cafeteria, and there is often a line to use them because so many people bring their own lunch.

    As to the thrift stores, if you have good taste, you can find some really good stuff there. When I was just starting working in the 80s, there was this young secretary in the building who was always very well dressed. It looked like she bought her stuff in some boutique. A friend of mine wanted to get some of the same things, and she asked this girl where she got her clothes. The girl said – “you wouldn’t believe me, but I get it in thrift stores”. You just need to know how to look.

    I don’t need to buy in thrift stores nowadays, but for the first couple of years after I started working, I did shop there occasionally. Some of the things I found there looked more expensive than stuff I bought at regular stores. One time in a shopping mall I visited Macy’s, and saw a sweater I liked. It was more than I wanted to spend on a sweater, so I passed (btw – and the credit card in my handbag wasn’t tempting me at all because I understood that I’d still be spending my money). One month later I bought the same sweater in a thrift store for $5.

    I donated some really good things to thrift stores too. When I was losing weight, especially, I had to donate some never-worn items. Nowadays I buy most of my clothes on sale at the end of the season in stores like Ann Taylor, so I bought them, had no chance to wear them and lost weight. They still had tags.

  16. 16
    Trav Says:

    I _do_ enjoy saving, and even so it’s hard to justify doing it when savings accounts pay 2% and inflation is 4%.

    This is the worst environment I can remember for saving money. (I’ve only been paying attention for 15 years or so, so I don’t remember the last stagflation era.)

    No one knows what to do with their excess capital now. Stock valuations are higher than usual, yields are lower than ever, real estate is poisonous. Even people who have a pile of money too big to spend are having trouble finding places to put it.

    An article on savings habits needs to take overall economic conditions like these into account. Follow the incentives.

  17. 17
    GM Says:

    The problem is that everybody appears to have a SUV or a large home, but a smaller proportion can actually afford it. It all comes down to self image and having the strength to live with less.

    Perhaps savings could be more achievable if it were automatic? As has been said before, if you withold for a 401K, it is not seen in your take home pay and so you don’t miss it.

    My thumb rule is that other than for the house, I always have funds on hand prior to making a purchase. I may still take a loan if I get 0% for an extended period however but I have the money sitting in savings.
    For doing this, I have had to save sometimes for over a year and I know how difficult it was to reach my goal and that helps me respect money more.

  18. 18
    Independent George Says:

    I’m with Kitty (#15); my parents are also immigrants who had no difficulty figuring out that if you don’t pay on time, you have to pay back more than you borrowed. They also had no problem teaching their rotten kids the same lessons. Sure, it’s fun & easy to blame greedy corporations, but it all comes down to individual choice. I’ve made my share of bad financial divisions, but I can’t blame anyone for them but myself.

  19. 19
    Jim Says:

    Maybe I’m just odd, but the only thing I enjoy more than saving and investing is sex.

  20. 20
    KC Says:

    I’m on vacation this week – at a beach in SC. I was just thinking how nice it would be to have a place here, but I wouldn’t want the extra house payment or other expenses because it would require more hours at work for me and my spouse. Then it dawned on me why we are so relaxed…cause we save our money and don’t spend it on things like second homes, third cars or anything else that we can’t really afford. We don’t have to work all these extra hours or extra jobs cause we do save a lot of money. For me I’ve found that by not spending I have a lot more freedom and independence and that makes it very easy for me to save.

  21. 21
    Silicon Prairie Says:

    1. The other half of saving is increasing your income. Find out what would make your time more valuable, do that, then find someone who recognizes it. I’m self-employed and although it was hard at first I learned and worked to improve every aspect of what I do and it’s really paying off now. All it takes is demanding what you’re worth, knowing what that really is, and improving it if necessary.

    2. Although it’s usually a good rule to not borrow money to buy things, it’s good to have the option. It can even be useful – having more available credit means that it’s easier to build a credit history, and that means that when you do have to borrow (say for a mortgage) you can get lower rates – and that means saving.

    3. I’ll ask again – what part of making money without working ISN’T fun? If you can save $1 you can start earning interest today, and eventually put it in long-term investments for better performance. Since learning about all the possibilities is a lot easier than getting started (it doesn’t cost anything), I’ve built up a lot of anticipation for saving and investing. Knowing that as soon as I put in a little extra money I’m starting to get something back, I can’t wait to have enough extra cash to put into my investments. Maybe learning about investments is my form of “consumerism” :)

    To get a little more non-mainstream, there are times when wanting is more fun than having. If you have $10,000 saved that could be a nice family vacation, (part of) a new car, new furniture, etc. I guess it depends on the person but thinking about all the possibilities can be fun. Once you commit to something that’s it – the potential is gone. And if the choice you made wasn’t as good as you expected you aren’t getting it back.

  22. 22
    Dave Says:

    A big reason why it is so hard to saves these days, is that people have a lot less help than they used to. Social Security seems to be on the ropes, and pensions are quickly becoming a thing of the past. With those fallbacks disappearing, personal savings have to pick up the slack. Workplace savings programs are a great way to build a nest egg, but half of Americans don’t have access to them.

  23. 23
    Rita Says:

    I am born in Europe live here now for 9 years and realy love the US. The only thing I couldnt understand is why most people dont save and spend spend spend. Now I know and I will do the same. Not going into debt but make sure I dont have anything. My husband who is a US citizen had 2 strokes in the last 2 years is not working and do NOT collect any SS or disability. No worry don’t need to as long as I work. And we manage very well. In March of this year I needed surgery, did well untill 1 week later I needed another one, something went wrong, and it get worse, after another week they flew me out of this state to another one to save my life. Now I am on my way to recovery, thank God. Also now there is no more income coming in. We applied for help whereever we can, denied cos we have some savings not too much anymore as we bought a house 3,5 years ago. But still enough to denie us. Do you think thats right?????????? I know people who are getting everything cos they have childeren but they are also on drugs. For my job I needed a drugtest to get the job, so I am working for them to buy the drugs as they get money from the government, and cos I save and not doing drugs so I can have a job I get punished. Please where is the logic in this story.

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