Habit to save starts in childhood
Two stories got my attention this week. The first: Fed Chairman Bernanke says interest rates will remain at record-low levels for two more years, which means that my savings will earn nothing until maybe 2014. This in turn means I might outlive my assets. Not a pretty prospect.
The second has to do with Chinese New Year celebrations for the Year of the Dragon and how saving money plays into the Asian culture. The NPR program Marketplace Money ran a segment in which Tess Vigeland visited Chinatown in Los Angeles and learned how saving is taught from generation to generation. Grandparents and other seniors are giving red envelopes of money to young people in honor of the Dragon, a deity associated with water, the rainmaker that brings prosperity.
Asians are “debt averse” and so they save money, often in mattresses, because they value liquid assets. They need to feel, touch and see it, she said. This may have been where the idea of a rainy-day fund began.
Many Asians use no credit cards, according to the show. They might get a loan to buy something huge, like a house, but try to avoid borrowing because wealth and authority are synonymous in Asian culture.
We could all learn from these people, Vigeland opined after her tour of Chinatown. But how are our children to learn the value of saving when our economy seems to depend on consumer spending? And are zero interest rates a disincentive to save?
I was taught to save through the age-old method of managing my allowance, meager as it was. My older sister and I were given about one dollar a week, which actually was worth quite a bit. We had to write down everything we spent and were required to save something, no matter how much, as long as we put away a few coins.
My list looked something like this: one movie ticket (child’s matinee, which included a newsreel, a serial episode, a cartoon and a feature); one hot-fudge sundae; and one (or more) streetcar fares. We lived only a mile from the village, so we often walked.
To re-enforce this lesson, I was given $100 each September to buy school clothes. Mother took me to Orbach’s and taught me how to find designer clothes (remainders or end runs) with the labels removed. When I asked how she knew all this, she told me an interesting story.
Before I was born, during the Great Depression, everyone was bemoaning there were no jobs. Mother was at a party one night and bet she could find a job in one week. Macy’s was hiring sales people, so she got up early (probably a first for her) and waited in line, then filled out the forms and was told to wait. She waited several hours and was almost ready to give up when her name was called. Looking at her education (she had graduated from Vassar summa cum laude), the interviewer said she was overqualified for sales but there was an opening for an assistant buyer. Mother took the job thinking she would quit after collecting on her bet, but stayed because she found it fascinating, even though she hated getting up early.
So I learned how to buy good clothes on the cheap and also became a lifelong saver. At 18, I converted my coins to green and flew to New York. I wound up working all summer in Manhattan in the garment district modeling fur-trimmed coats for buyers in a walk-up without air conditioning. At a scant 5’4” I looked ridiculous in the coats, and sensing an impending dismissal, I switched to a small ad agency. There I rewrote old copy to conform to changing seasons and other dismal assignments. Then Mother called to say our house had burned to the ground, reducing everything to ashes.
The good news was that I would be receiving a check to buy some winter clothes. At Saks Fifth Ave. I modeled and sold junior size clothing, a much better fit, and got 20 percent off of all purchases, including a winter coat with interlining, a really big deal in New York.
Back in California, I had saved enough to buy a big, talented horse with a few nasty habits. I waited tables to pay entry fees, and after a season of mediocre performances, we started winning. Naturally, I saved the prize money as though we hadn’t won. After two years I had accumulated enough to buy a small house (2 bedrooms, 1 baths in a decent neighborhood) that I kept rented for enough to pay the mortgage (an assumable G.I. loan at 4 percent), taxes and insurance. I sold it to help make the down payment on a ranch, which is still in the family today.
So now the recession has dampened rampant consumerism and folks who didn’t think they had to are saving. Some schools are starting to teach kids about money. And I hope parents are showing children how to accumulate wealth one quarter at a time.
The incentive won’t come from interest for a few years more, unless Bernanke has an “Aha” moment, but the habit of putting away money, not only for a rainy day, but to save for necessities instead of using plastic, is one that can last a lifetime.