When Genesio Morlacci – who operated a dry-cleaning shop and later worked as a part-time janitor in retirement – left the University of Great Falls $2.3 million after he died at 102 in 2004, the story naturally made national news.
Never mind Morlacci’s major generosity – it was the man’s ability to save that left so many of us shaking our heads in amazement. He was thrifty – he repaired his own clothes – but his gift was the result of a lifetime of savings and sound investments. His frugality didn’t mean he didn’t spend – he and his wife splurged on trips to his native Italy.
Morlacci’s story comes to mind as the Commerce Department sounds the alarm about Americans’ lack of savings. The agency reported Monday that Americans’ savings fell to minus-0.5 percent last year. The savings rate has been negative for a year just twice before – in 1932 and 1933 – as Americans spent what they had to cope with the effects of the Great Depression.
Things are different, and contradictory, these days. The theory now is that housing prices have risen so dramatically, homeowners don’t believe they need to save. Analysts also say the rebound after the stock-market dive has left many investors feeling rich. While many homeowners are indeed doing well financially, many others are living paycheck to paycheck, relying on credit cards for everyday expenses. In 2002, home foreclosures were the highest in 30 years.
Other analysts say that the Commerce Department numbers are misleading because they don’t include capital gains and investments in pension plans. Dallas Salisbury, president and chief executive officer of the Employee Benefit Research Institute in Washington, told the Christian Science Monitor that there are about $12 trillion in retirement accounts that are not included in the savings rate. Nor could it possibly include the inheritances many baby boomers will get from their more fiscally conservative parents.
But Salisbury acknowledged that a large number of Americans don’t save and have never saved. Many just don’t make enough money to save. On the other hand, many Americans spend beyond their means. A 2004 study by the nonprofit Thrivent Financial reported that 54 percent of low-income nonsavers said they didn’t have the income to afford savings. More telling, however, were the 50 percent of those who earned $50,000 to $75,000 who said they couldn’t afford to save.
The financial analysts can debate the details, but the message is clear: Save more, spend less.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
