No Time Like Present:
Ready, Set, Save Money

April 24, 2005 Sunday

The Arizona Republic (Phoenix)

Russ Wiles

Slowly but surely -- and whether they like it or not -- Americans are being  asked to assume more personal responsibility when it comes to saving money.

President Bush's call for private Social Security accounts is the most visible indication of this, but there have been other signs -- from the gradual  shift from traditional pension plans to the new bankruptcy law, which makes it tougher to seek debt relief.

Yet despite all this writing on the wall, many Americans aren't yet meeting the challenge. The nation's personal savings rate now stands below 1 percent,according to the U.S. Commerce Department.

A study last year by brokerage A.G. Edwards & Sons found that only 53 percent of Americans have a retirement plan in place. Plenty of individuals don't even have the suggested three to six months' worth of income in a rainy-day fund.

"Many people don't have money to fall back on in an emergency," said Julia Ogden, executive director of Arizona Saves, a non-profit Phoenix group that  provides basic financial guidance.

All this points to a greater need to develop a saving culture. That's not easy to do in our spend- and credit-driven society. Sometimes, it has to start with baby steps, and sometimes, it even has to start with loose change rather  than big bills.

Jennifer Lopez, a 27-year-old homemaker and an Arizona Saves member, is trying to put herself on a solid financial footing after a bankruptcy filing a couple of years ago that she attributes to a divorce. The Glendale woman has  saved enough to purchase a car and hopes to buy a home in a year or so.

Lopez usually pays cash for purchases, handing over bills and putting the change in a container. "It can quickly add up to $60 or $70," she said. "And I watch what I spend."

America Saves, the parent organization of Arizona Saves, estimates the typical American family has $99 sitting around the house in loose change -- in jars, under car seats, beneath couch cushions and so on. Whether that's an  accurate tally, it speaks to the way small sums and a little scrimping can add up.

For example, if you could scrape together an extra $5.50 a day -- roughly the cost of a Starbucks coffee drink and cookie -- you would have more than $2,000  after a year.

Income-tax refunds are a good way to start a savings plan.

Most taxpayers got money back this year, with the average federal refund running $2,189, Internal Revenue Service reports. Arizona state income-tax  refunds so far average $416.

Many people leave money on the table by not participating in workplace 401(k)-style plans. One in three eligible employees doesn't sign up, according to Hewitt Associates, even though most employers offer matching funds and Uncle  Sam chips in by deferring taxes on the amount workers contribute.

A.G. Edwards' tips for growing a nest egg include participating in a workplace retirement plan, starting early, diversifying investments and  monitoring your progress at least once a year.

Another tip is fairly easy and painless to put in place: Pay yourself first by having a set amount of cash taken from your paycheck or checking account on a regular basis and diverted into a saving or investment vehicle. After a while, you won't miss the diverted cash because you won't see it in your take-home pay.

While you're at it, sign up for electronic bill paying. Here, the immediate  inducement is postage savings. But electronic payments can be even more valuable if they help you avoid late-payment fees and the collateral damage on your credit report.

If you're really serious about saving money, check out www.bankrate.com and search for "331 ways to cut costs." The list ranges from making the most of bank  and utility services to avoiding costly restaurant and entertainment bills.

Few of these tips by themselves will revolutionize your finances, but, cumulatively, they can add up to something tangible.