What Happened to Savings Plans?

If you are under forty, you are probably too young to relate to this topic, but you might learn something about why so many in your generation have not saved anything for their retirement.

There is a K-Mart advertisement that runs this time of year on their lay-away plan to pay up-front for gifts for the holidays.  I’ve seen it several times this week. It reminds me of that we used to save up for Christmas gifts.  That is my topic for this week.

We live in a world where credit and debit cards are the norm, and we seem to expect to pay those high rates of interest on credit card balances.  Why else would there be such a hue and cry whenever the credit card companies send the letter advising of the rise in rates?  Why else are there so many people with $30,000 or more in credit card debt, enough to spawn the growth of debt relief businesses?

When I was a youngster, and possibly up until my kids were also teens, the banks used to have two special accounts.  One was the Youth Savings Account.  It was endorsed by the schools and participated in during school hours. 

I don’t recall exactly how we deposited our savings, but I believe it went something like this. We would bring our passbook and our money to school once a week for deposit into our account.  The teacher would collect the money and note the amounts on deposit sheets with our names on them. We would make the entries into our savings account passbook, a good arithmetic practice.  The teacher would pool all the deposits and send them to the office to be sent to the bank with all the other class deposits.

Lots of us kids learned good savings habits and built up substantial accounts.  For some, it was the first link in a lifetime savings account that helped pay for college, that first car, or other young adult needs.

The other account offered by banks was the Christmas Club Account.  That one was open to everyone, and adults commonly had accounts for just that purpose.  If you saved more than needed for your gifts, you merely left a balance and continued into the next year.  Some of those accounts stayed active for years.

Now this might surprise some of you, but we actually paid for our presents as we bought them.  That’s right, we didn’t have to be concerned about those high bills coming in right after the New Year celebration died down.  What a novel idea!

We would be so much better off if we learned good savings habits while in our youth, and if we also learned that purchases, exclusive of homes and autos, should never incur long-term debt.  Credit cards, while useful to avoid carrying cash, encourage wasteful (and hasteful) spending habits.  Try to make it a rule that all credit card purchases are paid off within the 30-day “no interest” period.