Nationally, the percentage of Americans living paycheck-to-paycheck dropped from 51 percent to 43 percent from August 2005 to July 2006 and from 58 to 52 percent for 18- to 24-year-olds, but the younger group?s percentage for saving regularly slipped from 62 percent to 38 percent in the period.
“The data show that younger Americans are making a little more money and feeling less financial pressure,” said Loretta Abrams, vice president of consumer affairs, HSBC bank of North America, whose consumer advocacy group conducted the survey. “But they haven?t made the next step of becoming effective financial planners.”
Abrams added that 77 percent of 18- to 24-year-olds also reported being concerned about their level of savings.
“Locally and nationally there is a problem [with the group],” said Mary Ann Hewitt, executive director for the Maryland Council on Economic Education, a Towson nonprofit that seeks more financial literacy education in Maryland schools. “The highest-growing bankruptcy rate ? and identity theft rate ? is with 18- to 24-year-olds.”
One recourse for the group is simply to generate more monthly discretionary funds.
“So how can you find some money without necessarily getting a pay raise?” Abrams asked, prepared to offer five ways people can squeeze $50 more a month out of their finances.
Assuring that her recommendations were tested in real-world consumer experiments, Abrams suggested: switching to generic or store brands when shopping; reviewing auto and home insurance policies, possibly raising deductible levels; using lower octane gas; modifying telephone and cable television packages; and eating out two times less a month.
“Any one of these practices would save the average shopper $50 per month,” Abrams guaranteed. “Then the important thing is to decide what to do with the $50 ? and we recommend that you apply it to either reducing debt, saving for a major event, or retirement planning.”
Abrams, whose organization offers a financial literacy Web site at yourmoneycounts.com, stated that the $50 found, saved at a compound interest of 4.95 percent, would yield $932 in 18 months and ? even if no more was added ? $4,103 over 30 years.
And, she said, if one were to add only $50 a month to a 30-year mortgage payment, the homebuyer would save four years and four months on the payoff and $39,000 in interest.
“All in all,” she said, “this proves the benefits of saving as soon as you can and as much as you can, and let time do the work for you.”
