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The problem is not a financial problem but a moral one.
By John Horvat II, The Stream, July 19, 2018
A booming economy should help people make good financial decisions since more money can be directed to other needs. That is why savings rates normally go up as the economy improves. People naturally tend to take advantage of better days especially after bad or slow times.
This is not happening now. Many Americans are spending more on consumer goods, but they are not saving their money or accumulating wealth.
No Emergency Funds
Nearly a quarter of households, for example, do not have any available emergency funds according to a survey conducted by the SSRS research firm. Another third do not have any wealth or have negative wealth outside the value of their homes. There are no signs of change on the horizon.
Such facts should set off alarm bells. However, it appears most people continue their spending habits. The survey shows that most situations have changed little or even worsened despite good times. In fact, sixty-two percent of those surveyed said they were somewhat or very comfortable with their emergency savings. This comfort was shockingly shared by one in five of those who have no emergency savings. The report laments that “many families are living on a knife’s edge, yet not resolute to do anything about it.”
Such statistics are more than just numbers. There are always those who experience hardships and are struggling to do something about it. This does not seem to be the norm. Most prefer not to worry about their financial future. They are optimistic and believe misfortune will not visit them. Yet others believe they can rely on others to help them. They think family, friends or government will see them through troubles.
Gone are the days when everyone practiced thrift to save for rainy days. The recommended savings norm has always been to put away enough to cover at least six months of normal expenses. The survey showed that only 29 percent of Americans have this safety buffer. This is down from 31 percent in 2017. Other categories between no savings and six months showed only very slight improvements.
Rich and Poor
The findings appear in unexpected categories. It appears that savings is not necessarily a function of income. Rich people join poor in this mindset that embraces all income levels.
Thirty percent of younger baby boomers between 54 and 63, for example, have no emergency savings as they approach retirement. One in four of the highest income households have no savings or enough to cover less than three months.
Millennials in general were the least likely to show concern for their emergency savings. A quarter of both millennials (age 18 to 37) and Gen Xers (38 to 53) have no savings. Roughly another quarter of both generations have less than a three-month buffer. Such savings put them in a precarious position since this is the prime time for forming families and building wealth.
The Virtue of Providence
The problem is not a financial problem but a moral one. It involves the virtue of providence, which is the foundation of any vibrant economy.
Providence involves the habit of exercising foresight by adapting means to an end. This might be seen in the case of parents who save money for their children’s education. It is found in those who budget their money to include savings. It calls for delaying gratification to secure the future. A society that fails to practice foresight is living on borrowed time.
Human providence mirrors the action of Divine Providence by which God governs the universe and directs the course of the affairs of humanity with purpose and benevolence. The very term reflects this goodness since Providence provides for necessities over time. When things become difficult, people can rely upon God to come to their aid.
However, Divine Providence requires that people cooperate with God’s loving protection by exercising their own foresight and diligence. The idea that God helps those who help themselves is vital to any healthy social order.
Thus, a booming economy can solve many things. It can provide jobs and opportunities. It can supply abundance and choice to help people enjoy the fruits of their labors.
However, there are other things that a booming economy cannot provide. It cannot guarantee wise choices when virtue is not practiced. Boom times can even lead to a party economy that throws caution to the wind and favors improvidence and recklessness.
John Horvat II is a scholar, researcher, educator, international speaker, and author of the book Return to Order, as well as the author of hundreds of published articles. He lives in Spring Grove, Pennsylvania where he is the vice president of the American Society for the Defense of Tradition, Family and Property.