Too Much of a Safe Thing?

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In an uncertain economy, there’s a right way and a wrong way to save.

When Monika Black was in college, she began having panic attacks about money.
Even though she had plenty in her bank account, she was petrified by the notion
it could all disappear in an instant—a fear she inherited from her mother.

“My mom is the youngest of 11 kids, and she grew up during the Great Depression,” says Black, a financial consultant with DyMynd, a boutique financial empowerment firm that specializes in teaching women to take control of their financial future. “She always had a fear of losing all her money—tomorrow. Even though she had a stable job and money was not a concern for us, she was still responding to money like it was the Depression.”

This is a common story among children of the 1930s, and it’s one that is being told again now, as Millennials, Gen Xers and Baby Boomers alike struggle to heal from the wounds of the 2008 financial crisis. A recent PurePoint® Financial survey found that 51 percent of Americans learned their savings habits from their parents, which means those habits are being passed down through the generations. That same survey reported that 60 percent of Americans aren’t confident in today’s economy, and this lack of confidence can lead to what Black calls “saving out of fear”: hiding money in the proverbial shoebox rather than entrusting it to a financial institution.

Black tells stories about a friend who hides money behind a picture frame because she feels it’s safer than in a bank, and the time she cleaned out her late grandmother’s house—and found $25,000 stashed beneath the mattress and behind the doors.

Pierre P. Habis, president of PurePoint Financial, wants to help people like that step out of the shadows and take control of their financial destiny by getting into the habit of saving. The first step, he says, is to establish a savings budget: a specific dollar amount or percentage of your paycheck that goes into your savings account.

“Even if it’s a dollar a month,” he says.

Habis believes that the impulse to save is the foundation of financial well-being. When he hears stories like those from the women DyMynd has worked with, he suggests these consumers do a little research to find a savings account they can trust and to demand the best possible return on their money. If a savings account is earning less than 1 percent interest, he says, it’s losing money to inflation—and is no better than hiding your money under the mattress. As long as the bank is FDIC-insured, as PurePoint and all other major financial institutions are, there is no risk that the money will be lost.

“Americans do not have to settle to get a great rate for their hard-earned money,” he says.

In consumers who survived the Depression, Habis sees an admirable dedication to saving money, even if, as in the case of Black’s mother, it is sometimes accompanied by anxiety. In Millennials who came of age or entered the workforce during the recent recession, he sees the same drive to save, and he thinks that, harnessed properly, this desire can be powerful.

“It’s healthy to have a population that’s thinking about tomorrow,” Habis says. “We want all Americans to be saving in double digits.”

For Black, the most important step toward a healthy financial mindset—one that allows a person to save and invest sensibly—is understanding where your emotional financial security and your attitude toward money comes from. To overcome the financial panic attacks that struck while she was in college, she had to start by calling her mother to talk through their shared anxiety about money.

“I told her I’d keep the lessons on savings,” she says, “but give the anxiety back.”

By WSJ. Custom Studios.

Disclosure:
WSJ. Custom Studios is a unit of The Wall Street Journal advertising department. The Wall Street Journal news organization was not involved in the creation of this content.

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