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Plan Well, Retire Well

Saving and investing your money

Why Save in a Recession?


Hi there,

Please allow me to introduce myself. My name is Kimberly Nute-Jones. I am a Consumer and Family Economics Educator in Cook County. My office is located in Matteson, Illinois. I generally service the south side of Chicago and the south suburbs. I am a wife and mother of two teens. My hope in participating in this blog is to connect my real life experiences to many of the topics that we teach every day. Therefore, you will probably hear personal stories and get to know me in an intimate way. So, read the story below, and let me know what you think.

My son just recently graduated from 8th grade. He collected about $400.00 in cash. Boy was he excited! He told me that he wanted to open a bank account. He already has investment accounts for college, but no longer has a local bank account. I agreed to take him to the bank to open an account. Being a financial educator, I figured this would be a great teachable moment.

First, we talked about the banks where we already have accounts. We decided to compare rates, minimum requirements and all the usual things that are considered before opening an account. When my son saw the interest rate on the savings accounts, he hollered "THAT'S IT?!!" At first, I attempted to explain that in the past rates were higher, but since the recession, things have gone down quite a bit. That answer wasn't quite good enough. His response was "I might as well keep my money at home."

My daughter didn't make things any better. Years ago, they both had minor savings accounts. Although the bank wasn't supposed to charge fees, they were erroneously taking fees out of the kids' accounts every month. Each month I would have to call the bank and have them credit the fees back. My daughter remembered the experience and did not want to open another account.

I tell both stories because in times like these, it is human nature to focus on the negative instead of the positive. Retirement planning is a long term process where benefits may not be realized for years. Like my son, some of you are asking "why should I save for retirement? Things are bad!" You should save because you are not saving for today's rate, but for tomorrow's return. Buying low and selling high is still a good principle to live by. When the economy turns around, the investors that bought at lower prices will reap the greater reward.

Those who have had bad experiences, like my daughter, tend to write off the saving and investing world all together. My question is: what are the alternatives? When you choose not to invest in your company's 401(k) or open a personal IRA, what do you have left to depend on during retirement? Will Social Security be enough? Will Social Security still be around? To see what your estimated monthly Social Security benefits will be, go to the Social Security benefits calculator at http://www.ssa.gov/estimator/. Can you survive on that? If you want more, use one of our financial calculators at http://www.ace.illinois.edu/cfe/calculators.html to figure out how much you need to save. These are just some things to think about.

Needless to say, both kids opened bank accounts and are waiting for their debit cards to arrive. They saw the need to have a place to hold their money for safe keeping and I hope that you will, too. If you have been sitting on the sidelines waiting out of fear, hopefully you will find a reason to trust again. Get off the sidelines. Do your research. We have volumes of information on saving and investing on our website. If you still have questions, we are around to help; shoot us an email or give us a call. I look forward to sharing my thoughts, and at times, my complaints with you.

Until we talk again,

Kim



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