There are two stories that caught my eye. The first, about Americans finally starting to save. And the second, about how much saving will cost Americans. Both stories seem to suggest somehow that saving is well, almost un-American right now. Pluueezeee!
The second WSJournal story, “What a Penny Saved Costs” by Sudeep Reddy, A12, forgets to tell readers about what a Penny Saved EARNS. It’s called compound interest. Take a moment today, maybe at dinner, to talk about savings. Then, explain what happens when you save — that you earn interest. Take it one step further with your kids and give them this example to chew on:
If you put $4 a day every day in a savings account that pays you 5% interest, your savings would be worth $427,025 when you’re 67 years old. (Here comes the best part — pause and lower your voice for dramatic impact here.) ONLY $80,352 is from the daily $4 deposits. (drum roll…) The other $346,673 is the interest!
Compound interest to be exact. Interest that earns interest. That is why we save — to make our money work for us.
Saving is a good thing — not a bad or un-American act. Spending will continue — we have to eat, clothe, live, educate and entertain ourselves. We will just now do all of that and save a little as well — for the rainy day that is here and the one that is yet to come.