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Color of Money: Does America have a savings crisis?

Michelle Singletary on

My explanation still didn't make mathematical sense to Pashia, who said he would soon pay off the debt.

"My money 'earned' more paying on the card than sitting in an account waiting for an emergency," he argued. "I believe in savings, just not when you are already paying credit-card interest."

In part, I agree that you shouldn't park thousands of dollars in a low-interest savings account when you have expensive credit-card debt.

But having savings is like wearing a life jacket, even if you're a great swimmer. You might not need it, but you're grateful you have it should you get caught in choppy waters.

Besides, if math were all that mattered, then folks wouldn't be in debt in the first place, paying double-digit interest rates for meals out, movies, clothes or vacations. That makes no financial sense.

Make it your goal to accumulate at least $1,000 in an emergency fund. Once you hit that target, stop saving so that you can attack the debt.

Here's a story of someone who was saved by her saving prowess.

 

She's the single parent of three kids in college. The children's father had a stroke, and as a result, he couldn't continue his financial support. At the same time, a broken water line flooded her basement. During the repair, the contractor found mold, which was not covered under her homeowner's insurance policy.

"I feel sick about all these things, but I am still able to handle all these costs," she wrote. "I have an adjusted gross income of $50,000, and I have put away enough money for all these emergencies. It's important to note that I never got behind, because that makes everything all the more difficult. But giving up little things such as cable and dining out makes a huge difference. People can do this."

Take the America Saves Pledge at americasaves.org. Set a goal and create a plan to achieve it. I don't want you out there without a life jacket.

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Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2019, Washington Post Writers Group


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