The concept behind saving is that one day those saved dollars will provide you with the ability to pay for things without income/lower income. It can also allow you to deal with a crisis such as a job loss or worse. One thing that emerged from the Covid era was that many consumers saved more than in prior years. By the start of 2022, people in the 40% to 80% range of income percentiles had more than $500 billion in extra savings. Why?
1. I think the shock of Covid opened the eyes of many to the importance of saving more.
2. Many consumers saved money by working from home, saving on commute time and costs (most Americans drive 30 miles per day to and from work), childcare, eating out for lunch at the office, dressing up, make-up, grooming, etc.
3. Many consumers saw the benefits of having savings to be able to buy things at discounted prices when opportunities arose. Investing $10,000 in January 2020 in the DOW would be worth more than double today, 5 years later.
4. Covid stimulus delivered more than 476 million payments totaling $814 billion in financial relief to households impacted by the pandemic. Trillions more went to mom-and-pop shops, restaurants, airlines, hospitals, local governments, schools and other institutions.
Now that the world is relatively back to 'normal' again, the reality of what most people earn and what that buys in an environment with persistently elevated inflation is setting in and it leaves little to nothing for savings for many. Some might argue that many people choose to live beyond their means with too expensive cars, vacations, handbags, latte's, etc, yet I have observed the budgets and spending habits of several people to know this impacts some, not all.
Without savings (or gifts), there is no money for a downpayment to buy a home which can keep people forced to rent. Wages (living wages) should cover the basics: food, health, shelter, education, childcare and yes, savings. That often requires living below your means. But sometimes this is simply impossible. Yes, all this requires fiscal education at a young age. If this does not happen, the price we will all pay later will be much, much worse.
