Fed survey shows 40 percent of adults still can't cover $400 emergency expense

Correct me if I’m wrong.
Keynesian economic policy is designed to make the economy better by reducing savings and increasing demand.

Don’t have kids and don’t get married

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I don’t think this is a poverty problem.

I think it reflects our consumerist mindset.

PS Poverty is about 13%, tho I forget if that is “13% of individuals,” or “13% of households.”

Well it’s a non-linear upside down u-curve (health on the y axis and savings on the x) where more individual savings/prudence is better to an extent but then becomes worse for the overall economy. One of the paradoxes is that the curve shifts right for individual health and left for the overall economy, particularly in recessions.

~6-9 months expenses liquid should be a reasonable target.

People spend money on dumb stuff though. Your car payment shouldn’t be half of your mortgage!

Given that the median household income in the US is $59,000 (a little over $1,000/week), it would be prudent for a median household to hold $1,000+ just in their revolving accounts.

“. . . .the cost, for example, of a new timing belt on average is between $400 and $900, an alternator or starter replacement is $400 to $600, and brakes are around $500.”


I disagree…just choose your mate wisely. The truth is that if you do, the other half of your new whole brings many strengths and weaknesses to the relationship. Explore each other and figure out the strengths of each. Then as life throws obstacles at the two of you, the one most qualified to deal with it, does so, having the best interests of both in mind. What you’ll find is that you become twice as strong and can get ahead twice as fast, while cutting expenses between two incomes.

Certainly when people panic and suddenly shift from consuming to saving (such as aftet 9-11, after sudden bad news from wall st or a bank collapse) that sudden shift is bad for the economy.

Keynes went alot further and fell victim to Xenos paradox.

I don’t have his book in front of me(I havr his juiciest most fervently anti-savings quotes highlighted in green).

Keynes offered that if workers are paid $1,000 and save $100, then, because some portion of savings, (like $10), sits on the sidelines, an economy that saves will never be able to purchase the goods and services it just produced.

He was therefore, very much opposed to savings, short-term and long-term, sudden shift and otherwise.

Most modern economic schools of thought begin by assuming Keynes was overzealous but correct at his core and thus are hyphenated Keynesians, ( neo-Keynesians, post- Keynesians, countercyclical- Keynesians etc…)

IOW they all begin their economic theories with the assumption that the free market is bad and government must (either long term, or during recessions or whatever) thwart the free market and cause it to save less and consume more.

I should have broken that response into two pieces. I use my phone for Hannity posts, but I still tend to post long responses as if everyone is reading a computer monitor. :frowning:

He’s right about the kids though.

A lot of the problem is many people can’t help but spend.

I drive an older car – it’s paid for, I don’t have a monthly car payment. My motorcycle is an older one as well – and again no car payment. My cell phone, cheap straight talk plan with a cheap phone. I bought a HD flat screen three years ago because my (as my daughter puts it) big box TV finally died after 15 or 20 years. Wasn’t the biggest and best a person could buy, but it works for what I use it for.

Now a contrast is a couple I know. Both drive brand new cars (they let it slip that just one car has a $600 a month payment!). Now remember they are paying on TWO cars. Every year they both have to run out and get the brand new Iphone as soon as it’s offered. Their kids get the hand me down previous year cell phone, then they sell a couple that are two years old. I bought a HD flat screen three years ago because my (as my daughter puts it) big box TV finally died after 15 or 20 years. Wasn’t the biggest and best a person could buy, but it works for what I use it for.

Twice a year they go on a cruise or fly someplace for a a week. They have the best TV’s money can buy. I think you get the point.

They both work, and they both make more than I do a month. My car was making a funky noise, took it to my trusted mechanic – $900 and a couple days later I had it back. This other couple, if they suddenly have a $400 emergency, they fret and fear and wonder how they will come up with the money.

They are both about half my age. I’m in the process of going through my monthly bills seeing what I can “downgrade” that won’t be a bid deal. Netflix gone (for that and other reasons.). My home phone . . . won’t have it in a week – I’ll be joining most everyone else and having a cell phone only. Sat TV – company I’m with now I’m disconnecting with and signing up with the competitor and going save $40 a month. Unfortunately my 3 year old cell phone is on it’s last legs – but it’s going to be another cheap sub $200 phone.

They require a lot of investment in time, money and energy. If a parent should ever have to bury one, it’s the hardest burden The Lord asks one to bear. On the flip side, my eldest daughter had her first child…making me a grandfather. There’s a joy that no amount of money can buy that comes with that grandchild. Much can go wrong with having children but also…much can go right that bears fruit to your last breath.

At least the Forgotten Man with no savings can take solace that banks and corporations are raking in record profits and just got even more from the tax cuts.

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I think the point is that 80-90% of us CAN AND SHOULD hold modesr cash reserves in case of auto repair, home repair a three day illness etc… (Only) 13% of the U.S. lives in poverty.

For the rest of us, even living paycheck-to-paycheck should come with a few hundred $$ in emergency money unless we are buying crap we don’t need.

Have you read anything from Richard Thaler? Nudge or Misbehaving? Behavioral economics and finance leader, Nobel winner. Has a philosophy called paternal libertarianism - freedom with some decision psychology thrown in to nudge people toward good decisions, I.e. saving. He’s a big proponent of opt-out 401k plans, where people are automatically enrolled in 401k plans and have to opt out rather than having to opt in. The difference in participation is stunning!

I’m a big believer in promoting financial literacy early in life. “Pay yourself first” is up there with “Don’t eat paint chips” in useful life advice. Reading Riting Rithmetic Roth IRAS - 4 Rs not 3!

I have not read those. What is going on right now, however is a deliberate attempt to reduce saving and increase consumption.

IOW we don’t need to start interfering.
We don’t need to nudge anyone.

THE PROBLEM (lack of saving) is deliberately caused by current policy.

I’m getting to keep more of MY money in each paycheck.
My electric and natural gas bills have gone down due to pass through savings
My car insurance went down due to them not paying as much corporate tax

Tax cuts won’t make a difference in my pay, set by the State legislature. Won’t get any bonues either.

Hundreds of thousands have gotten bonuses, less taxes taken out of checks, pay raises. Many businesses are putting more money into equiipment and the like.

But hey, Dem’s need to run on tax increases. They really need to use the slogan “Republicans give, and Democrats take it.”

Monetary policy today does not encourage short term/liquid/rainy day savings.

But even if it did, I doubt people would take advantage. Retirement savings are heavily incentivized through tax savings and company matches, and people don’t take advantage. Has more to do with consumerist psychology and how we measure ourselves against others than policy though.

According to the dominant econ philosophies, savings always entails cash reserves spending does not. Ergo reducing the savings rate among private individuals is good for the economy.

Currently the US personal savings rate is about 2.4%. So of every $100 after tax private individuals earn, we tend to save $2.40. If reserves are 10%, then $0.24 are placed in reserve and $2.16 is spent either as investment spending or consumer credit.

OTOH If Congress taxes away that $100, all 100 is spent. The whole thing. Ergo tax and spend is said to be good for tbe economy because it reduces savings and promotes consumption.

I’ll give you that, but only to a degree. If the free market reigned, there were zero or nearly zero Fed Res. interfere, interest rates would be higher, ergo under a free market people would save and would avoid using their credit cards.

My reply about how the tax code is helping was in respons to this:

The Forgotten Man -IS- being helped by the tax cuts. Just that many like the person I replied to want to pull the blinders over everyone’s eyes.

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