Why is it so hard for people to save money? Saving money is an important part of any family’s financial plan, helping to provide for emergencies, special purchases, education, and retirement. Many factors come in to play when it comes to holding on to your money, and the inability to save money does not always have a clear-cut reason. Several things exist which may contribute in some degree to the lack of savings by many Americans. Some reasons clearly have to do with things we have no control over, while others can be controlled. The good news is that clearly understanding and identifying a situation is the first step towards resolving it. Unfortunately, some families are not in a position to save much right now, but everything counts and the sooner saving starts, the better.

Human Nature

Saving money is a form of discipline, and discipline can be hard when it comes to money. The ability to save comes in degrees; some people have no problem saving, and some tend to save enough for near-term projects or purchases but may neglect to fully fund their retirement. Others live paycheck to paycheck, needing to spend everything they make just to keep afloat. Saving also involves delayed gratification – it is never fun to put off buying something now because of the promise of buying more later. Additionally, purchasing new items makes some people happy. Making progress on a home project, buying a new dress or power suit, or investing in a piece of jewelry for your loved one makes people feel good. In addition, we cannot forget the shopaholics – those who use shopping as a way to deal with stress or other emotional issues. Payroll deductions have been the magic pill in building savings for some people who struggle with their inner shopper, since money taken before you even get your paycheck is hardly missed.

Economic Influence

The dollar has less buying power in the current financial environment. Along with the devaluation of the dollar comes a decrease in the purchasing power of businesses, which must pay more to buy foreign goods and materials to produce products to sell. This additional cost gets passed on to consumers in the form of higher prices. This cuts into discretionary funds that might have been put into savings.

Family Needs

Costs continue to rise, and providing for a growing family can add up to a substantial amount. Feeding the family, paying for extracurriculars and driving kids around to after-school sports and other obligations with gas prices creeping towards $5 a gallon can cause parents to cut in other areas of the budget. Education costs are expensive even before the kids go to college, with many public schools expecting parents to donate their time and money liberally to compensate for tight school budgets. Higher education expenses have risen dramatically, and many parents wonder how they will send their children to college. One idea is to help kids maintain good grades to increase their chances for merit-based aid. Additionally, parents and their children can investigate low-interest educational loans from federal programs such as the Stafford Loan, and educational government grants such as the federal Pell Grant.

Low Savings Rate

Checking and savings accounts these days seem to pay no interest at all, and if they do, it is very minimal. Certificates of deposit are the next best place to keep money liquid while earning a bit of interest, but even CDs do not pay a whole lot right now. Reducing bills and monthly overhead is one good way to increase savings. Saving money by not paying it out in the first place is just as good as earning interest. Although interest rates are low, the sooner in one’s life money is contributed to some sort of mutual fund account or other interest-bearing account, the better chance their long-term investments can take advantage of growth through compounding of interest over time.

Awareness and Education

Visibility of the family’s overall spending situation is key to finding spare funds to save. Many families cannot seem to find the time to think about financial needs for the future, or they have no idea how to go about figuring out all the types of costs that could come up through the years. Some peoples’ eyes glaze over when the discussion turns to interest rates and compounding, and although these things work for us in an investment, they obviously work against us when we have high credit card or loan balances. If getting a handle on finances seems especially difficult, it may be wise to visit a financial planner. Many online financial planning resources exist, but sometimes it just works better to sit down with someone who gives your situation personalized attention and helps you come up with a list of achievable financial goals. Burying one’s head in the sand is not really a workable strategy, and many financial planners will provide free or low-cost initial consultations to help people start moving towards savings goals.

Easy Credit

In the mid-2000’s home loans with minimal required income documentation put many homeowners in bad positions, as they became stuck in a mortgage they could not afford and used up whatever savings they had to try and keep up with their payments. Lenders were also freely giving out second and third mortgages, even to people with a troubled credit history. Credit cards were given to just about anyone, and many consumers suddenly found themselves with tens of thousands of dollars owed on credit accounts. Banks are not entirely to blame, but some lenders and credit card companies preyed on peoples’ desire to have their own piece of the American dream. This proved to be tough to resist for many hard-working families who now have lost their largest asset, their home, along with any savings they once had.

Marketing Tactics

Companies earn profits by employing compelling marketing campaigns to convince consumers to purchase their products and services. Product advertisements are being presented in ways that are more creative all the time with advertisers trying to build a “lifestyle” or image that comes with the purchase of certain goods. “Good parents” buy certain advertised products for their children, or people who own certain types of cars must be successful. Too many people part with their savings to acquire material goods in the hope of gaining whatever is promised by persuasive marketing campaigns.

Saving money may never be easy, but acquiring the discipline to reduce overhead expenses, and passing on the overpriced café lattes and luxury cars may start to leave some money at the end of the month for savings. Moreover, seeing a positive and growing bank balance may bring its own meaningful rewards with feelings of financial and personal security.

Alan Dunn

Written by Alan Dunn – one of our highly talented and underpaid writers. For more information on Alan follow him on Twitter or Google Plus

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