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Live Below Your Means

If you would be wealthy, think of saving as well as getting. –Benjamin Franklin

Franklin had it right.  You can accumulate funds when you live below your means.  Savings doesn’t just have personal implications.  It has national implications as well.  Saving enhances a nation’s banking system and encourages private enterprise.  A high savings rate  lessens the need for social programs.   It can also  be a factor in our national defense and wartime.

America was once known as a saving nation.  However, over the last three decades our saving rate has been in decline.

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What has changed?

One important item is housing.  In 1950 the average American home was 983 square feet.   In 1973, the average American home had 1660 square feet.  In 2010 the number was  2392 square feet.  Savings down.  Square feet up.

This has long term implications because very few people pay cash for a house.  In other words you are committed to a fifteen or thirty year mortgage.  If a couple becomes house poor, they have diminished their freedom to save, invest or start a new business.

Turning a nations’ views on housing and spending is monumental task.  Education is one key component.  Finra’s Investors Education Foundation did a study on American’s Financial Capability.

The numbers are sobering.  56% of respondents do not have a rainy day fund.  34% of the respondents just pay the minimum on their credit cards.  61% of respondents failed a basic financial literacy test.

Our children and nation would be well served with the simple wisdom of Franklin.  Think saving.

Sources:  US Census, FINRA  Investor Education Foundation

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