Savings but no Loan
I just read in my morning paper that 38% of Americans who make over $100,000 a year would have a hard time covering an emergency bill of $1000. They’d have to sell their BMW convertible or their condo in Kuaia or jerk their kid out of Harvard law school for a semester. Or at least a week. You can only imagine what the rest of us have in rainy day savings, much less tornado day when the fiscal roof gets blown off the old shack. Nearly two thirds of this country don’t have a grand on hand, but they have credit cards. We average about 2 and a half per person. Get in a scrape, put the bill on the card. When all else fails, declare bankruptcy and start over. A million of us do every year. Most of that is because we don’t have health insurance.
Down here on the fiscally conservative South End, a thousand bucks is a lot of wampum. I suppose we could blame ourselves for not filling the piggy banks and our savings accounts, but last time I looked the Fed had kept the interest rates down to practically zero, hoping to stimulate a languishing economy after that Wall Street meltdown of nearly ten years ago, not a lot of incentive to save which is what the Fed wanted. If you’re patriotic, spend it now, don’t wait to buy that Lexus.
If you were like my folks and lived through the Great Depression, you learned some hard lessons. You didn’t want to be in debt. The banks who made you those easy loans wouldn’t be so friendly when the sheriff came to repossess your farm. The Great Recession, I’m not so sure we learned those same lessons. The banks might’ve. They pass out those credit cards instead of loans and they got a lot of extra charges at the brick and mortar, help them make up some of the losses when folks didn’t have enough money to play the stock market the way they used to.
Down here I see more neighbors playing Lotto than the Dow Jones. And a few play at the Southendomish Casino, hoping to cash in on the blackjack tables. I asked a buddy once who’d just bought a brand new John Deere riding mower how he could afford it on his paycheck and he said he figured out the minimum payment on his credit card and calculated how much overtime he’d need. I said do you understand how much interest that would be, probably cost you twice the original price of the mower? He said all he worried about was that minimum payment.
I used to think folks didn’t understand interest and percentage. I used to think they had bad math skills, maybe didn’t realize the odds down at the Casino or the fee at the ATM. I used to blame the education system for not teaching basic economics, household economics, you know,bank accounts and loans and interest calculations. As usual, I was wrong. They understand it probably better than me, they just want that riding lawn mower. And hope overtime doesn’t dry up. I guess they’re not as nervous as me.
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