More look to saving for future

Creating, filling nest eggs gain priority in recession

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Beverly Peltier and her husband, Mark, are saving for their son's future a nickel and a dime at a time.

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Beverly Peltier, the director of institutional advancement at Augusta Technical College, is saving for her son's education.   Zach Boyden-Holmes/Staff
Zach Boyden-Holmes/Staff
Beverly Peltier, the director of institutional advancement at Augusta Technical College, is saving for her son's education.

Any spare change they get goes into a jar that one day will finance David's college costs. Peltier said she also completes paid surveys online and puts the proceeds into David's college fund.

The goal, she said, is to help him pay for higher education and ensure that she and Mark are debt-free by retirement.

"I think we do one thing that Americans don't really focus on, which is living within our means," said Peltier, the director of institutional advancement at Augusta Technical College.

She added that the couple still lives in the same house off Walton Way that they bought 18 years ago when they married, never moving to a larger house.

"If one of us were to lose a job, we know we could still get by on one income," she said. "Everyone always thinks bigger, better, shinier, but I think, 'Do you really need that much extra of everything?' "

Since the Great Recession took hold in late 2007, people such as the Peltiers have been pocketing savings and working to shore up their financial futures.

In July, personal savings made up 5.9 percent of disposable income, according to data from the U.S. Commerce Department's Bureau of Economic Analysis.

Personal savings had dropped to as low as 1.7 percent of disposable income in August 2007, before the housing and financial markets began their falls.

On-time credit card payments also have been increasing in recent months, though charge-off rates from credit card companies are still much higher than before the financial downturn.

"I think the mindset has changed with a lot of people, and they want to have cash reserves even if they feel their job is secure," said Dan Blanton, the president and CEO of Georgia Bank & Trust. "There is a lot more reluctance to use credit cards to finance frivolous purchases."

A nation of savers?

It's not unusual for people to buckle down and save more money when times are tough, said Simon Medcalfe, a finance professor at Augusta State University.

"The last several recessions, the savings rate has increased because people are worried about their jobs and they're trying to build up that buffer," he said.

Despite the savings increase, the rate was higher during recessions in the 1970s and 1980s, landing around 10 percent, Medcalfe said.

Blanton said he doesn't necessarily see more people opening savings accounts, but he has noticed people with savings accounts beefing up their balances.

Most savings and money market accounts have an annual yield of less than 2 percent because of high demand for safe investments in the downturn, but banks are trying to entice customers using other means.

For example, Georgia Bank & Trust is offering 4.01 percent annual percentage yield on balances of up to $25,000.

"If you don't save enough for your retirement or long-term goals, you're not going to be able to enjoy your retirement or achieve your long-term goals," Medcalfe said.

Forming a plan

During the economic downturn, more people have been seeking financial advice about their savings and retirement, said Jeff Fehrman, the president and owner of Fehrman Investment Group, an independent firm in Augusta.

"Having a plan of action significantly increases your chances of success, in my opinion," said Fehrman, who advises the Peltiers.

Putting aside 10 percent of annual income is a good place for people to start, several financial planners said.

Will Rogers, an Ameriprise financial planner in Evans, said that although he is cautious about applying any rule of thumb too widely, people should try to build a nest egg of 10 percent for short-term financial goals such as paying for a vacation or property taxes. Another 10 percent is useful for long-term goals such as buying a home, he said.

Savings become particularly important when a person has an unstable job, Rogers added.

"The more unpredictable your income is, the more you need to save to account for unpredictable times," he said.

When a household starts to tackle debt, credit cards should be paid off first, Fehrman said. Credit cards often have high interest rates that aren't tax-deductible like a student loan, he said.

One problem some people run into with debt is that even as they pay it off, they acquire new debt, Rogers said.

"A lot of times, folks will say, 'I will pay off this debt and then I will start saving,' " he said. "But if they look at their past behavior, they will pay off the debt and replace it with new debt."

National personal savings rate

July 2010 5.9%

July 2009 6.1%

July 2008 3.8%

July 2007 1.8%

Source: Bureau of Economic Analysis

Comments (15) Add comment
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omnomnom
3964
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omnomnom 09/09/10 - 03:09 am
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NO DON'T SAVE YOU'RE RUINING

NO DON'T SAVE YOU'RE RUINING THE ECONOMY (as sung by ben bernanke and the keynesians)

disssman
6
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disssman 09/09/10 - 06:09 am
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That example of how to earn

That example of how to earn 4.01% sure has a lot of added requirements (must haves) to get that amount. Further, if it is soo good why don't they offer it in a savings plan and only in a checking plan? Something strange here.

workingirl32
0
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workingirl32 09/09/10 - 06:21 am
0
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good idea, need commitment

good idea, need commitment saving money,

maggiemae
0
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maggiemae 09/09/10 - 07:12 am
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I tried it, but I am now out

I tried it, but I am now out of nickles and dimes. Waiting..waiting for another Obama stimulus check. I keep mssing mine.

Little Lamb
49247
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Little Lamb 09/09/10 - 07:16 am
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Sorry, maggiemae, but the

Sorry, maggiemae, but the stimulus checks go only to those who actually voted for Obama. You and I don't qualify.

Chillen
17
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Chillen 09/09/10 - 07:17 am
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Great article! Our US &

Great article! Our US & State Governments could take a lesson from this.

disssman. I have one of those 4.01% accounts. They are WELL worth the hurdles - which really are minimal.....
1. get your statement online instead of mailed
2. set up one auto deposit or one auto bill pay (who doesn't do that anyway?)
3. Use your debit card 10 times per month (the money they make from Mastercard by you using it is how I think they pay the high interest).

I make sure I always have $25K in the account so that I get the maximum interest possible. I love geting my huge interest payment from them every month!

Fawkes
79
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Fawkes 09/09/10 - 07:53 am
0
0
I built up a decent amount of

I built up a decent amount of money over a few years all it took was lots of work, saving and not buying things you dont need. Was not fun but it worked, since Im not working now that money saves me.

maggiemae
0
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maggiemae 09/09/10 - 08:09 am
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?

?

maggiemae
0
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maggiemae 09/09/10 - 08:11 am
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Many, many folks could save

Many, many folks could save by cutting back on their grocery bills. Losing a few pounds would be good.

emergencyfan
0
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emergencyfan 09/09/10 - 08:17 am
0
0
Yes, that makes sense. Give

Yes, that makes sense. Give up food - not cable tv, cell phones, or SUVs.

poolmom
49
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poolmom 09/09/10 - 08:58 am
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Chillen: I agree with you. I

Chillen: I agree with you. I already did all 4 requirements anyway!!!!

maggiemae
0
Points
maggiemae 09/09/10 - 10:08 am
0
0
emergency...But cutting back

emergency...But cutting back on groceries would make it easier to afford the luxuries. I guess it depends on whether you would rather relax in front the the tv or struggle with extra weight.
Seriously, and I was not serious before, there are all kind of ways to save...

LAughing
0
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LAughing 09/09/10 - 11:23 am
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Good! Put that penny in your

Good! Put that penny in your pocket!

andywarhol
0
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andywarhol 09/09/10 - 01:45 pm
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This is all on the same

This is all on the same principles taught in, "The Millionare Next Door" and "The Total Money Makeover."

Taylor B
5
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Taylor B 09/09/10 - 03:20 pm
0
0
My savings are mostly in

My savings are mostly in silver...

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