Save to Save Yourself


By Anthony Campano

Saving is a practice often preached to young adults who have just entered the workforce, yet pushed aside in certain occasions, such as moving out of your parents’ house or buying a new car. However, CNBC released a statistic that should strike you as remarkable: “47 percent of Americans said they could not afford an emergency expense of $400.” Living outside of our means is a major problem in America, and we as a country should be trying to resolve the situation with much more enthusiasm than we are.

A number of rich countries--most notably Japan--are starting to experience economic woes associated with the aging of the population. For America, this problem is on its way, albeit in the form of an entitlement crisis. With almost half of the country saving nearly nothing for their retirement costs, Social Security is predicted to spend even more money than it will bring in (it already does this today). The baby-boom generation is growing closer to retirement, and with the threat of more people being out of the workforce than in it, an enormous decision will have to be made on what to do about Social Security. At the microeconomic level, households will grapple with greater dependency burdens.

The burden will be felt by yours truly, the future American taxpayer from the X and the Millennial generations. Therefore, our generation will face the task of correcting this problem. Do we blame the older population for not saving, or do we “take one for the team” and pay substantially higher tax rates? This issue is in no way black or white, as there are many reasons as to why the older generations have little to none in their savings account.

First off, that 47% is four percent more than the amount of people that live paycheck-to-paycheck. The key fact cited in defense of these lower-middle class citizens is the ‘starvation’ wage of $7.25 an hour. Is this a wage that is sufficient enough to save the recommended slightest amount of 10% off of every payday? Second, in an argument provided by Forbes, “Social Security is the only government-sponsored inflation-adjusted retirement payment for life. Ask your employer if they will convert your 401(k) to a guaranteed, life-time inflation-indexed annuity. After the laughing stops, you’ll have a different attitude about Social Security.” By not allowing workers to take advantage of the Social Security perks, you are putting their retirement plans into the hands of the CEO. For example, Wal-Mart--America’s biggest employer--is considered to only focus on excessive profit maximization, not the economic welfare of their low wage workers, who have no education and no one else looking out for their financial stability.

From the other standpoint, why should it be on us to pay for the financial burdens of older generations? Was it us who were poorly saving or investing in unaffordable houses? No, but the moral of the story is that we must abandon these financial habits of the previous generations, and figure out how to handle the mess.

How we, the millions of young adults today, decide to handle these challenges will shape our way of life, and most likely set the standards for financial sustainability for generations to come. We cannot take this choice lightly.