Whenever I speak to a group of high school or college students, I ask them if they know what the personal savings rate (after taxes) is for adults in the U.S. Their typical response is usually in the 10 percent to 20 percent range.

When I share the student’s answers with adults, their "typical" response is laughter -- lots and lots of laughter. Why? Because most adults know we haven’t seen double-digit personal savings rates for years.

In fact, the current personal savings rate in the U.S. stands at 0.2 percent. Here’s what that means in real money. If an adult has $2,000 a month of after tax income (disposable income) and they save 0.2 percent, it would equal a whopping $4 a month, or approximately 13 cents a day.

According to the Federal Reserve Bank, from 1980 through 1994, the personal savings rate in the U.S. was 8 percent. Since then, it has been declining faster than you can say "charge it." Bottom line, our personal savings rate is now the big goose egg -- zilch, nadda, zip! I don’t know about you, but I find that rather unsettling.

Some economists attribute the low savings rate to an increase in value of people’s investment portfolios and retirement funds. The rationale is that if net worth is increasing, why bother saving additional money. Yet others suggest there could be a link to the rapid increase in home values and the easy access to home equity loans. My theory is a bit more simplistic. When it comes to money, every message we hear and see tells us that it's much sexier to spend it than it is to save it.

Currently, half the adult population has saved little or nothing for retirement. Should we be concerned? In a word -- yes.

To turn the tide, we need to get this issue onto everybody’s radar screen -- especially children’s. I’m all for spotlighting our national "Teach Your Child to Save Day" and Financial Literacy Month (it’s every April), but what about the rest of the year? If we are going to make some head way and increase our personal savings rate, this subject needs a much higher profile.

Nothing against "Teach Your Child to Save Day," but let’s use a slogan that acknowledges the bigger picture. Something like -- "It’s Cool to Live Within Your Means."

Then let’s make a commitment to every young person in America that we -- parents, schools, banks, faith based organizations -- will help them understand basic financial concepts like paying yourself first and the power of compounding. And while we’re at it, let’s teach them how to interpret the millions of advertising messages our culture bombards them with year after year.

Help a young person set a savings goal. The younger they are, the shorter time frame. For example, if they are age five, saving for a week or two is probably the maximum. But if they are in their teens, something more significant and with a longer time horizon -- like saving for college -- is very appropriate.

Saving is about patience and discipline. But it’s also about knowing the difference between a need and a want. The people I know who do well with setting and then achieving saving goals have the needs and wants thing down cold.

What was the most expensive item you have ever paid cash for -- that is, not made payments?

You might have to think about this for a while, but when you remember what it was share it with your children. It will be a good springboard for other savings related discussions.

The personal savings rate in Japan has been declining steadily over the past few years and is now just 5 percent. It is projected to become zero by 2007.

Source: Newsweek International

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