The last reported savings rate in America was only 4.4% for November of 2014. Historically, it’s on an average of around 8.8%, according to the U.S. Bureau of Economic Analysis. The truth is, if everyone had a savings close to 9% of their money each year, and invested it wisely, the average person wouldn’t be struggling to retire at age 65. According to research done by Employee Benefit Research Institute and Greenwald and Associates, 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting primary residents of defined pension plans. In addition, 60% of workers have less than $25,000 according to the same survey.
Now, I’d like to believe people across the board are saving 8.8% of their income, but that’s just isn’t the case month after month, especially as of lately if the large majority of people only have $25,000 to their name for retirement. There might be some months where people don’t spend their entire paycheck, but we are seeing that most people end up flushing their money down the drain at one point or another.
Do you remember being in school and the teachers teaching you about money? I don’t either, and if they did, it usually was if you save your money you can afford to buy things. While in itself, this is true, it isn’t the complete reason why you should save your money. It’s this concept of once you have enough money to buy something, then you empty out your checking account and go and purchase some temporary pleasure. At 12 years old, kids were emptying their savings for video games toys. At 16, kids start blowing their money on expensive clothes, eating out, and car expenses. By the time these kids are adults, they are conditioned to save their 4.4% and flush it down the drain for some worthless temporary fulfillment.
Savings needs to be more than stashing away money to watch it all fly out the window on junk. Savings is something that always grows. There’s nothing wrong with living and enjoying life, but if people can learn the power of true savings, they can get to a point where they can literally live on a portion of the growth of their savings and still continue to see their net worth appreciate.
I’m blown away by celebrities who have made many millions of dollars and still manage to turn that money into nothing. But it makes sense because most people are conditioned to spend what they have without a long-term outlook on their future. A story that has been an inspiration to me is that of Shaquille O’neal, and his first million he made when he was first drafted to the NBA. He blew through $1,000,000 in just 30 minutes, but unlike some celebrities who stayed broke he used this as a lesson and turned his life around.
As of today, Shaq is the joint owner of 155 Five Guys Burgers restaurants, 17 Auntie Annie’s Pretzels restaurants, 150 car washes, 40 24-hour fitness centers, a shopping center, a movie theater, and several Las Vegas nightclubs. As of now, he can enjoy some of the income he sees from his investments and continue to watch them grow.
Too many people say they are saving their money, but what they are really doing is getting ready to drop it all on a boat with nothing left to show for it afterwards. Don’t be this kind of person! Learn to enjoy your life, but be a true saver and build long-term wealth that grows.
Chief Editor at CrushTheStreet.com