VGPolyglot said:
We live in a consumer-based economy though. If everyone started saving their money we'd go into a recession. |
I wasn't suggesting saving 50% of your income.
Setting aside 10% for savings and 90% for spending would a major improvement for many people. Right now a large number of Americans save 1-2% if they do at all.
Savings can be divided into three categories, short terms "rainy day" fund, long term savings plan, and retirement plan.
Rainy day is a set amount of money you want to have, my suggestion was two months minimum of bills. Let's say that is $3000 for someone to avoid issues like a hot water heater bursting or replacing car tires. You are spending that money, it is set aside for a purpose. If you're lucky and never have rainy days then you can stop allocating funds to it and spend it.
Long term is being able to save up for house or car because these saving are building to spending. Doing this puts you in a far better position and helps you live within means.
Retirement investment account is savings, but the money serves a purpose in the economy, it goes to companies and grows wealth. For many people these days can expect to live into their 70s and 80s so if you want to retire at 65 like most have to figure how to live those last 5 to 25 years of your life.
Spending does move an economy, but it isn't sustainable and can create bubbles that lead to recessions like we saw in 2008 with housing. We were so desperate to sell houses they were sold in a way that people who could not afford them had them and then were foreclosed on when the payments ramped up. If you had a system where 40% down payment was required you'd have fewer home owners, but the market would be solid and less predictable. It's a balance in a society how much we promote growth or sustainability. I think growth has been pushed for so long that we live way beyond our capacities and another recession seems inevitable in coming years.
