Uh-oh! Families are Making the Same Mistake Again…

Here are two pieces of data that should be of interest to you:

1. The current savings rate for the average American is currently 2.6%.

That’s less than half of what it was just a few short years ago.

In fact, the savings rate is at the same level as it was during the housing bubble. And we all know what happened after that bubble burst.

Actually, one of the silver linings about the economic crisis of 2008 is that the savings rate in this country went up dramatically, as you can see in this chart.

But the entirely global economy had to take a few hard hits to the chin for people to realize the importance of saving.

And that increase in our savings rate was only temporary. Soon after the economy pulled itself up from the canvas, the U.S. savings rate began tapering off again.

2. The Dow hit a new all time high on May 28th, 2013 soaring to 15,409.39.

This is the missing link of data that explains why the savings rate has continually been on the decline for decades – save for that short-term improvement a few years ago.

People are feeling the need to save less because they figure they will make it up with higher stock market returns.

This is some of the same insane thinking that got families in big trouble in 2008.

But let’s step back a little further to the early 1980’s. Massive deregulation’s in the financial industry led to widely available and easily accessible lines of credit. Around the same time, the stock market really started taking off.

And you can guess what happened to our then solid savings rate.

People gave up the act of savings and did the exact opposite – taking out lines of credit. With credit so widely available, it basically dared and lured consumers away from savings and use the money instead on items that were once just a little too far out of their price range.

Now, wanting to buy nice things isn’t the problem here.

Our clients want their children to go to the best colleges without the burden of a six-digit debt. They want to retire comfortably knowing that they won’t outlive their money.

Our clients are part of the solution. And we can provide that solution to them.

But often, they can get lured back into our credit culture and neglect the pressing need to save.

Don’t let your clients fall into this trap.

A way to do this is to consistently remind them of the end goal – that whatever short-term sacrifice they may need to make is fastest and safest route to economic prosperity.

Save. Save. Save.

That should be our mantra.

But at the same time, you need to be ready for some resistance on their part because, let’s face it, we’re asking them to change their spending habits dramatically.

If the voice objection or doubts, show them that the value of your products and the value of savings are identical.

Be valuable.

John McCarthy
Managing Editor, Leads4Insurance.com

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