Increase in savings a good reaction during recession

A well-known parable says you have to walk a mile in another person’s shoes before you can really understand them. Putting this parable to work, the Community Action Partnership dedicated the month of May to raising awareness about helping low-income families achieve economic stability. It hopes to raise awareness by inviting its employees to go without the luxuries they are accustomed to for three weeks. The idea is that by having its workers voluntarily live beneath the nation’s poverty line, they’ll be able to better service those in poverty who come to them for help.

According to the 2000 U.S. Census, it is estimated that 254,000 Utah residents live beneath the federal poverty level. Each year, poverty guidelines are released by the U.S. Department of Health and Human Services through the Federal Register indicating poverty levels. For a family of four, the magic number is just more than $22,000 in annual income and a single person has to earn less than about $10,000 per year.

It’s an interesting exercise to impose a meager allowance on people with plenty so that they can learn to deal better with those who have less. Unfortunately, the experiment doesn’t offer any kind of tangible solution beyond leaving participants a little more empathetic, with a story to tell at dull cocktail parties.

Many people are poor because of circumstances beyond their control, while others are poor because they can’t market their skills or effectively manage their money to build wealth. The recession is causing a lot of people to save their pennies and plan for unexpected misfortune.

Economists say families are saving more and spending less because they are worried about layoffs, unpaid job furloughs or getting behind on house payments. According to RealtyTrac, more than 342,000 households received at least one foreclosure-related notice in April. The U.S. Bureau of Economic Analysis reported that the savings rate last year was about zero, but now it is hovering above 4 percent.

You don’t have to pretend to be poor to know what it feels like to be in poverty. At one time or another, life is going to deliver some form of financial stress. The key is to plan for the unexpected to ensure you can take care of yourself and your family. You teach people how to manage their resources and how to improve their condition rather than pretending you don’t have enough, as the CAP is suggesting.

It is a telling statistic that people are saving more today than last year—that’s a good thing for families. For many of us, the recession is forcing circumstances we’re not used to dealing with. Students especially need to wise up financially, live within their means and plan ahead.

http://www.dailyutahchronicle.com/opinion/increase-in-savings-a-good-reaction-during-recession-1.1752619