FDIC Tips

A Consumer Message from FDIC Chairman Bair for America Saves Week


This is America Saves Week. But it’s hard to talk about putting money away during these tough economic times, let alone actually doing it.

The good news is that even as we are working to dig out of the recent recession, Americans are finding ways to save more money. The recent financial crisis has wreaked economic havoc on a lot of families. But if there is one silver lining, it is that we have learned the hard lessons of too much borrowing. We are paying down our debt and saving more. In the process, we are rediscovering the peace of mind of financial security achieved through saving.

It doesn’t have to be hard to find $10 a week to save. Do you buy your lunch every day when you’re at work? Instead, make a sandwich or salad at home and bring it into the office once or twice a week. Or skip your afternoon snack from the vending machine.

Eventually, this savings can add up to a lot. If you put $10 every week into a savings account and even if it earns only 1 percent interest, you will have more than $2,600 in five years, $5,400 in 10 years, and more than $11,500 in 20 years – perhaps just when you are ready to retire or need that money to send a child off to college. Compare this to just making minimum payments on a credit card balance of $5,000. Paying an interest rate of 15 percent, it would take 24 years to repay the balance, and you would pay more than $7,000 in interest to your credit card company.

There are easy ways to make saving automatic. Open up a savings account if you don’t already have one and have a portion of your paycheck deposited directly into that account. Or ask your bank to regularly transfer a set amount of money from your checking account into the savings account. You can even have your tax refund directly deposited into your savings account.

Help your children save more, too. When you give them their allowance, pay them a little extra – say a quarter or 50 cents -- to put straight into their piggy banks. That way you will teach them the value of saving automatically. Buy them a clear plastic piggy bank or some other transparent container so they can watch their quarters pile up and grow. After they’ve accumulated several dollars, take that money to the bank and put it in a safe, FDIC-insured bank account. Many banks offer savings accounts just for kids with no fees and no minimum-balance requirements.

By allowing children to accrue savings and earn interest from an early age, children’s savings accounts can finance much of a child’s college education. Studies show that even a small amount of savings significantly influences a child’s desire to attend college. Moreover, built up over time, children’s savings accounts can reduce reliance on student loans and ease young people’s financial burden. Tragically, last year, college graduates started out in life owing an average of $24,000 in student debt.

We owe it to ourselves and to our kids to have the peace of mind of a secure financial future. Let’s budget, save and spend responsibly. Who knows? Maybe the government will get the same idea and stop spending and borrowing so much, too.

During this America Saves Week, I encourage all Americans to join me and my family in making a renewed savings commitment. Let’s resolve to maintain that commitment throughout the years to come.