Bill Van Sant, a managing director for Girard Partners, a Univest Wealth Management Firm, was featured in the Intelligencer
January 1, 2017
By Crissa Shoemaker DeBree, The Intelligencer
Growing up as one of six children born to Depression-era parents, Maureen Hibschman learned early the value of saving money.
Her father used to drop dimes into an old scotch bottle. Her mother called their savings "lightbulb money," for those times when they needed a few extra bucks to get something in the house fixed.
The Bucks County resident doesn't know how much she has saved over the years, but it's likely in the thousands.
She paid for her 25th anniversary cruise almost entirely in cash. She paid for much of her daughter's wedding last summer in cash, either saved in dollar bills and coins or withdrawn from a retirement account. Gus, a 4-month-old cockapoo, joined the family a few months ago, bought from a breeder with cash the family had saved.
"I’m from a family that, if you pick up a penny, you save it," said Hibschman, who's 62. "You just save money. You never know when you're going to need it. It's nice to not have to charge and have to go into an account in an emergency.
"And basically, I'm cheap," she added. "I'm a bring-your-lunch girl, not an order-out girl. I believe you should never charge a meal, and never charge food. That's stuff we never do. If you can't afford it, you don't do it."
Many Americans could learn a lot from Hibschman.
The personal savings rate — how much Americans save from their disposable household income — was 6 percent in October, according to the U.S. Bureau for Economic Analysis. That's up from 1.5 percent in 2005, but less than the average 8.2 percent of disposable income Americans saved in 1985.
It's also far less than the savings rates in countries like Sweden, Germany and even Korea, whose household savings rates surpass 8 percent.
"Historically, we are not great savers, as a country," said economist William Dunkelberg, chairman of the Evesham-based Liberty Bell Bank. "We like consumption. We like to spend our money. We're lucky that lots of other people around the world like to invest in the U.S. We use lots of other people's savings to get the investment done in our country."
Sixty-nine percent of Americans have less than $1,000 in savings, according to a survey by consumer website GOBankingRates.com . Sixty-two percent were in that category in 2015. And 34 percent of respondents said they have no savings at all.
Having little to no savings may mean turning to credit cards in emergencies. A 2016 survey by BankRate.com found that only 37 percent of U.S. adults had enough savings to pay for a $500 car repair or a $1,000 medical bill in cash. Of those who didn't have that money saved, 23 percent said they'd reduce spending to cover the cost, while 15 percent said they'd use credit cards to pay the bill. Another 15 percent said they'd borrow the money from family and friends.
Data shows Americans do appear to be adding to personal debt — $21.9 billion in the third quarter alone, the largest increase for that period since 2007. That's according to the latest survey from WalletHub , an online financial services resource. Total outstanding credit card debt is $927.1 billion, with the average American owing $7,941 to credit card companies. Default rates remain low, at 2.86 percent.
"Once you don't have that (savings), you really are setting yourself up for a fall," said credit counselor Joan Reading, president of the Credit Counseling Center in Bucks County. "That's the part that fascinates me. Why do you make yourself vulnerable? When you start dabbling in credit cards, it's easy. One day you wake up and say, 'Oh my gosh, how did I put $5,000 on this credit card?' "
Reading suggests saving at least three months worth of income to cover bills, although six months is ideal. Having that cushion is more valuable than material things, she said.
"One of the reasons people don't save money is they don't think of themselves first," Reading said. "We're very busy trying to figure out how to concern ourselves with others. Make sure you're paying attention to yourself."
Saving money, however, isn't just important for peace of mind. It's also a critical part of the economy, experts say.
"There's an economic adage that a country can invest no more than it saves," said Dunkelberg, who's also an economic strategist at the wealth advisory firm Boenning & Scattergood and chief economist for the National Federation of Independent Business .
"If you spend all of your money, how much money have you got in the bank? None. How much money does the bank have to lend to businesses? How much can you spend buying stock in companies, which is a way of providing capital for them," he asked. "Saving is the only way we can get capital formation in the country, which is what we need to raise worker productivity and grow and have wages and compensation growth."
Dunkelberg, also a professor and former dean at Temple University's Fox School of Business, added that saving and financial literacy must be taught at a young age for there to be meaningful changes in the nation's savings rate.
"We really need better financial education," he said. "We will have to ultimately figure out how to become better savers and invest in our own country and our own growth. We have growing debt. The federal debt gets bigger every year. It crowds out spending on other things, including other entitlements, or defense. That's a problem for us, as well. Saving is important for the individual, but collectively, it's important for funding investment in the economy."
Financial education is one reason Ohio-based KeyBank began offering the online finance tool HelloWallet to customers earlier this year. The program compiles credit card, banking, retirement and spending data to come up with a financial wellness score for users. Having such information is a good way to start saving, said Bob Kane, president of the Eastern Pennsylvania market for KeyBank, which completed its acquisition of First Niagara banks in the fall.
"The first thing is, you've got to track where your money goes," Kane said. "What's going out the door? We use debit cards, we use credit cards, we use cash. What's leaking out? Where's it going? Do you really need that?"
Kane said his leading concern is growing student loan debt.
"Years ago, mortgages were the No. 1 debt instrument out there," he said. "That's good for the economy. People are buying houses. They're buying furniture. It's a long-term thing. Mortgages are now No. 2. Students loans are No. 1. If they're paying back their student loan debt, what will happen to buying houses? I think it has a longer-term implication. Higher-debt society, less owning, more renting — that doesn't sound like the American dream I grew up with."
Americans' retirement savings also remain a concern for economists and others in the financial field.
New Jersey scored four out of 10 on the National Institute on Retirement Security 's 2012 Financial Security Scorecard. That score included 46.29 percent of workers participating in a workplace retirement plan, according to the institute. Financial experts recommend workers save two to three times their annual salaries by their early 40s. However, the average account balance for workers in that age group in 2012 was only $29,777, while average annual earnings were $79,004 that year. Using the recommended formula, workers in this age group earning the average pay should have saved between $158,008 and $237,012.
Pennsylvania scored six out of 10, thanks to its higher percentage of workers participating in workplace retirement accounts — 50 percent, the 13th highest rate in the nation. The average account balance was $40,719; the statewide average salary was $61,240 that year, the institute said. That means workers earning that average should have saved between $122,480 and $183,720.
"Clearly, there's a crisis, particularly amongst baby boomers and younger generations, when it comes to saving," said Dan Roccato of Quaker Wealth Management in Moorestown, Burlington County.
High student debt makes it difficult for millennials, in particular, to save, at a time when they should be saving the most to allow their investments to grow over time, Roccato added.
"The power of time; when it comes to saving money, each day erodes (time)," he said. "Each day you're not doing it, you lost a day you're not getting back. When's the best time to start a 401(k)? The answer is yesterday."
Roccato said he believes people should save 15 percent of their annual gross income, but he said 5 percent is a good number with which to start. Raises, bonuses and extra cash should all go into savings rather than being spent. And get into the habit of checking your balance annually to make sure your account is performing as you want it to do.
"You just have people who aren't paying attention," said Bill Van Sant, senior vice president at Girard Partners Ltd. , a Univest wealth management company. "It's not top of mind. But also, everyone's used to (getting) something now. You click on Amazon, I can get something at my door the next day. In investment planning, it's not the case. Younger folks get frustrated. They get distracted."
Little distracts Hibschman from savings.
She has an elaborate system set up to maximize the money she sets aside.
Discarded coins found on the street are washed and put in a jam jar. Hibschman never pays with coins, opting instead to break a dollar and save the change. In memory of her father, dimes are placed into an old scotch bottle, while other coins are put in a series of other glass jars and bottles.
Extra cash is put in a leather pouch for about a week. During that time, she's allowed to take out money if she needs it. After that, she moves it into a notebook, where she meticulously keeps records of all her savings. Once it moves to that stage — and eventually, the bank — the money is off limits for spending.
Last year, Hibschman saved more than $1,750 with this system. This year, she's on track to save more than $1,800.
She also has passed along her savings habits to her children, Anna, 26, and Andrew, 29. Anna and her now-husband, Jared Ferguson, saved enough money to pay for their honeymoon trip to Spain, with enough left over for another trip in the new year.
For Hibschman, who retired early from Verizon, saving money means more than the ability to pay for things she wants without incurring debt.
"It's very powerful," she said. "It's powerful to think if something happens, I have the money to pay for it. It's powerful to think, if our children have an issue, we can help them. I hate to say it, but money is power."
Investments offered by Girard Partners, a Univest Wealth Management Firm, are not FDIC insured, are not a deposit of or bank guaranteed, and are subject to risks, including loss of principal amount invested.