Chapter Eight: Private Interprise's Role in Increasing Savings (Ronald T. Wilcox)

It is impossible to force people to save. It is, however, possible to change their attitudes towards saving. There are two very important tools to influencing individuals' attitudes towards saving: a good public policy and direction from the workplace. By using these two tools to encourage and direct people to making better financial decisions, the U.S. economy could be greatly improved. This essay was directed at business executives and owners so they could make their employees' lives better. By creating employee-sponsored pension plans, employees are not only provided for, but they have a better rate of remaining with the company. Some employees work hard simply because that is who they are and that is what they believe it means to be a good person. They work very hard and are very productive. They are motivated by pension plans because they look towards the future. On the other hand, there are employees who want immediate gratification and tend to be less productive - they also do not become motivated by pension plans. Therefore, pension plans are positive for employees and employers because they weed out the less-than-productive employees, leaving only the useful ones. Part of the difficulty of getting people to save is the struggle to reach out to younger works - they do not "aspire" to retire so they do not want to save; the words "retirement" and "thrift" have negative connotations. Therefore, the ideas do not need to change, the advertisement does. It also needs to be directed more at women and minorities. Men are often overconfident in their abilities and they can be impulsive. Women are less confident and therefore are more cautious; they listen, consider alternatives, can compromise, and are not as easily distracted. By educating women more on finances, they would be able to utilize their natural psychological dispositions as well as knowledge of "reasonable savings rates, risk and return, and asset allocation" while also communicating that knowledge. Another reason women should be targeted is because they tend to outlive men, leaving them to make important financial decisions later on in life. The writer says "Good people spend less than they earn, while bad people spend more than they earn." I personally can see some truth in it but find it a rather blatant statement that is not entirely true. Minorities also should be targeted at for financial education. They are subject to much racial stereotyping that can make them feel poor and inferior; they compensate for this by overspending on unnecessary luxury items and not saving like they should. There are nine fundamental steps that should be followed when setting up a company contribution plan that is defined and positive for the employees.

1. Choose a pension plan provider with low fees


2. Limit the number of mutual funds within the plan


3. Do not do payment-and-product-exchange agreements


4. Set the default asset allocation in thirds (between equities, bonds, and cash)


5. Set automatic enroll defaults on 401(k) plans


6. Give detailed and personalized financial counseling


7. Implement forward contracts for savings (this will ease the pain of sacrifice)


8. Limit personal conspicuous consumption (including the CEO and other senior-level employees)


9. Focus on employee savings

The workplace can and should become the foundation for the U.S. to revert back to a more thrifty economic lifestyle.

Chapter Seven: Crafting Policies to Encourage Thrift in Contemporary America (Alex Roberts)

There are essential two sides to America when it comes to the economy. On one side there are banks, financial advisers, and thrifty savers (referred to as the mainstream). On the other side are payday lenders, the lottery, and spender (not savers). The question for policymakers is how can those in debt join the savers and become more thrifty? The personal saving rate is a statistic that tells what portion of personal income is put in the bank, invested, or used towards buying a home. From the post-World War II period to today, Americans have been saving less and less. This statistic, however, excludes capital gains on homes, stocks, and businesses, which is why one must look beyond the savings rate to understand American families' true financial state. When capital gains are viewed, it can be seen that as asset values have risen, Americans have cut back on saving. The opposite happens when asset values fall. In the long run, the average American family has fared well despite the difficult economic times. Both middle-class families and immigrant workers have been saving well over the past several years. The average immigrant worker saves one-third of his or her income every month. Lower-income Americans have been increasing their rate of stock investment. They have also been thrifty with their money; they go in debt for assets which are used to increase their wealth so they can overcome adversity. However, about three in five families with lower incomes do not save at all. Somewhere between 15-35% of Americans are not saving enough for retirement. The question then becomes: why do some Americans save too little? There are a myriad of reasons. Lower-income families have less money to divide between consumption and saving/investing. Lower-income families do not have the financial aid institutions that are very helpful in saving money that higher-income families have access to. Lack of motivation is another explanation; oftentimes people succumb to their situation in life and never work to rise above it or overcome challenges. They set low goals to avoid the pain of failure. If an individual has no goals, then they have no need to plan for the future by saving. Some people believe the government should offer tax subsidies to those individuals who save, thus encouraging saving. However, the author believes that the government should first create institutions and products that would help saving and investing. Next, they must become creative to make effective ways to draw people towards thrifty lifestyles. The government, basically, would help individuals start saving by encouraging them and making the process easier. Three policy recommendations that would put this strategy into action are:

1. Create an "American Investment Plan" and mandate universal automatic enrollment


2. Create a public education program to promote thrift (much like Personal Finance class!)


3. Create a "Save to Win Bond" to compete with the lotteries

People are not saving enough on their own. This is why the author believes that the government must step in and enact policies that would not only promote and encourage thrift, but also force it upon the American public.

Chapter Six: Confronting the American Debt Culture (Barbara Dafoe Whitehead)

In the early twentieth century, Americans were aided by the various institutions that existed to help them be thrifty and save. These institutions included local banks, credit unions, savers' clubs, school savings bond programs, etc... These institutions were pro thrift and limited consumers' debt. There were also government regulations on interest and fees lenders could impose. Lotteries were illegal in all states; gambling was illegal in most. Today, the pro thrift institutions are now catering to upper-income Americans whereas lower-income Americans are now pray to institutions such as rent-to-own merchants, payday lenders, tax refund lenders, etc... Credit should be a tool used to buy houses, get educations, and start businesses - it can be a positive thing. Today there is more debt than ever before. Part of this is due to the fact that most of it comes from middle-income and young families who natural have more debt due to their stage of life which involves buying houses, cars, and other high-cost things. However, there is also a rise in late fees and missed payments. One in seven families say they've had to file for bankruptcy or use a credit consolidator at some point. One in three admit their financial situation has been "out of control" before. One of the reasons for this rise in debt is because people do not have the knowledge or self-discipline necessary to make smart financial decisions. This is where institutions are useful in the establishment of norms, conventions, and values that can aid individuals. The credit card is the most well-known and well-used of these anti thrift institutions. There are now billions of cards in use in America. The credit card industry changed the conservative philosophy of U.S. by appealing to customers who would only pay the low minimum balance and incur late fees and other penalties on a regular basis; they ensure long-term consumer dependency. Families that could once get by with their credit card debt are facing a different situation with today's economic problems. Almost fifty percent of credit card holders missed payments last year. Payday lenders are another predator to pro thrift institutions. They offer "Fast cash" to people who live paycheck to paycheck and require loans before their next payday. With the creation of direct deposit for Social Security checks, payday lenders have attacked veterans and disabled people, knowing they have a secure form of collateral. So far, twelve states have banned payday lending by placing caps on interest for small loans. The lottery was once illegal in nearly all states. Today, state lotteries bring in about fifty-seven billion dollars, representing a 500% increase. The lottery advertises itself in a way that makes consumers addicted and delusional - they get caught in a never ending cycle of doing "just one more try." Lower-income families spend the money on the lottery that they could be investing in stocks every year. In the past, when loan sharks were on the rise, there were two modes of reform. The first was to raise the interest caps and to prohibit fees or other add-on charges. The second was to create the credit union. It provided an alternative source of consumer credit for workers as opposed to the loan sharks. Credit unions gave workers the incentive to save and borrow from each other. Today, there should be five goals to accomplish which will promote thrift.

1. Reestablish a public education campaign (much like Personal Finance class!)


2. Challenge "Consumer Spending" as a main solution to economic problems (we should be saving, not spending)


3. Create a thrift savings plan available to all Americans (extend the Thrift Savings Plans from federal employees to all working Americans)


4. Build new thrift institutions


5. Repurpose the lottery (do savings tickets as well as lottery tickets)

Much like Benjamin Franklin and our other forebears, we should aspire to leave America a better and more thrifty place.

Chapter Five: In Savings We Trust: Credit Unions and Thrift (Clifford N. Rosenthal)

The first credit union that was established was created at the hands of Alphonse and Dorimene Desjardins in Quebec. With their neighbors, they raised $26.40 and founded a caisse populaire. They went on to establish a children's "penny savings" program that moved into schools. In North America, the St. Mary's Bank was formed in New Hampshire with the help of Monsignor Hevey of St. Mary's Church. Another key figure in the credit union movement was the capitalist/philanthropist best known for Filene's Bargain Basement: Edward Filene. He traveled the country establishing credit unions and working with people to legal enable the creation of the credit unions. This was accomplished in 1934 when a federal law passed. During the Great Depression, thrift became a necessity rather than a philosophy; there was simply no other way to survive life. People who organized credit unions did so with passion. People like Dora Maxwell and Louise Herring would travel, bring people together, educate them, and aid them in the chartering of credit unions. Race was restrictive of who could join credit unions, so African Americans had to form their own, which went on to help them for over sixty years to buy farms, indoor plumming, businesses, etc... Faith based credit unions were very important in this respect. The 1970s marked dramatic changes for credit unions. The National Credit Union Administration was established and imposed government supervision and regulationns. This caused the credit union movement to expand because the savings were now backed by the U.S. government. The number of credit unions doubled during the 1970s. Thrift was crucial to the credit union movement. Savings were not viewed as self-denial, but as self-help. The savings would provide for the individual during unwelcome changes such as job layoffs, medical bills, etc... The credit unions allowed saving to be systematic and regular. For low-income communities, there are community develoment credit unions. The pool the savings of people whos accounts are too small to interest a bank. Today, the savings rate in the U.S. has declined until it has reached negative numbers in 2006. The credit union movement as of 2007 involved 8,410 institutions with assets of over $757 billion. The credit union movement is important because it promotes human dignity, independence, and self-sufficiency. They promise hope for the country.

Chapter Four: A Century of Thrift Shops (Alison Humes)

Slightly over a hundred years ago, thrift shops began to appear in the United States. Throughout the course of their existence, the public's opinion, their function, and the values they represent have changed drastically. By tracing their existence, one can view the change in the importance and meaning of thrift over the years. Many thrift supporting institutions have faded - savings and loans, the Housekeepers' Alliance, National Thrift Week, etc... - but thrift shops still exist and are going strong today. Thrift shops initially emerged to provide employment opportunities - today they are charitable and nonprofit, but in the beginning they were created for employment purposes. The poor were also capable of purchasing goods from thrift shops. Thrift shops combined the values of diligence and industry with the capability of using that which would normally be wasted or discarded. Today, thrift shops also benefit health institutions, hospitals, and community programs. Edgar James Helms, a Methodist minister, began collecting donations and clothing and household goods in the early 1900s. He was not attempting to gain profit, other than the profit of ending poverty. Around the same time, the Salvation Army and William Booth had the idea to collect and fix old goods to be sold. The first thrift store was set up in Chicago in 1897 - by 2004, the Salvation Army would have over 1,526 shops nationwide. These organizations, among others, were all set up based off the religious ideals of ending poverty and being charitable for others while promoting thrift. Middle-class women seeking fulfillment would volunteer at these places in order to "save souls" and find fulfillment. Initially, second-hand goods and clothing were not part of the original plan for thrift stores; most of the goods were not donated, but rather made at home. The red Cross and the Salvation Army were soon supplied with donations and funds that enabled and encouraged them to making their stores more attractive for people. They began to organize, shelve, and hang their goods in more appealing ways as to attract buyers. Thrift stores were initially thought to be solely for the poor. Before WWII only the poor would shop there because the purpose of the stores was to help alleviate poverty. However, by the end of WWII, the middle class had become buyers at thrift stores as well. Secondhand became popular because thrift had become popular once more. The evolution of thrift stores went from ending poverty and helping the poor, to providing jobs for those in need, to raising money for various missions, activities, and groups. Thrift is not simply forsaking luxury; it is knowing when to splurge and when to save. It is being wise with one's money. In this sense, thrift and luxury are innately intertwined. Thrift shops enable people to practice thrift by buying everyday items at cheaper prices, allowing them to splurge on the occasional luxury item.

Chapter Three: Thrift for a New Century: Public Discussions about Thrift in the 1910s and 1920s (Sara Butler Nardo)

Thrift became the most important virtue during WWI. Presidential speeches and campaigns revolved around the topic. The war was fought at home with thrift making it a symbol of patriotism. People envisioned thrift to be forward-looking and flexible, rather than rigid and reactionary. The government was not the only institution looking to encourage thrift, banks also wanted to encourage as many people as possible to save as much as possible. The American Bankers' Association ran several campaigns to teach students about thrift education. The YMCA and the NEA also both supported thrift education among and schools individuals. This new movement wanted to discuss the new-found prosperity of the era as well as ease the tension and apprehension the working class held towards the concept of thrift. Thrift was seen as a solution to poverty: instead of charity supporting their ways, thrift would encourage them to better themselves and gain independence. Because thrift was the solution, the problem was the temptation towards speculation, fast money schemes, and gambling and the ease of which people could waste money on things such as drinks. This is why thrift institutions blossomed throughout the nineteenth century. Various works of literature came out during this time period to support thrift. Among them were The Book of Thrift, The Value of Thrift, and The Development of Thrift. Thrift was thought to give individuals "poise, moral stamina, courage, ambition, independence and efficiency." Thrift proponents had to fight the ideas that thrift was strictly an economic virtue and that it was simply hoarding and greediness. S. W. Straus pointed out that there is a disparity between a miser and a spendthrift and that a thrifty man is far removed from either. An argument against the idea that thrift leads to stinginess is that only those with excess wealth are not only willing but also capable of sharing their wealth. Thrift leads to charity. Thrift is what makes man civilized. Women were thought to be at the heart of thrift. Men might bring home the money, but women direct its use and that is why by 1920, sixty-five percent of all savings banks account holders were women. A thrifty man is neither one who spends money frivolously nor is he one who never spends it; rather, he spends his money wisely. After the U.S. entered WWI, thrift was used to buy bonds and fortify the nation's economy. Wartime thrift involved conserving goods on the home front and raising goods for the war efforts - specifically funds. Liberty Bonds and War Savings Stamps became extremely popular. Unfortunately, for many Americans, thrift did not care over into their lives after the war. People began to splurge on things that they once went without. Thrift began to be taught in schools again and the American Bankers Association were huge advocates of such education. School savings banks became popular, existing in forty-six states for a total of over $9.5 million. The YMCA sponsored National Thrift Week. Today, the United States continues to struggle to promote thrift.

Chapter Two: U.S. Mutual Savings Banks and the "Savings Bank Idea": The Virtue of Thrift as an Institutional Value (Sorcha Brophy-Warren)

In Ruthwell, Scotland, Reverend Henry Duncan established the "Savings and Friendly Society" as the first modern savings bank. Citizens were taught to practice thrift by not wasting money on either clothing or alcohol at the bank. Mutual savings banks were designed specifically to aid in the practice of saving. The very first U.S. mutual savings bank was the Provident Institution for Savings which resided in Boston. Mutual savings banks soon appeared in New York, Pennsylvania, Connecticut, Rhode Island, and Maryland. These banks exclusively protected deposits, made limited secure investments, and provided depositors with interest. They uplifted the poor and working classes by encouraging them to save rather than spend money. Aside from the upkeep, the profits belonged entirely to the depositors of the mutual savings banks. They were idealized to have the potential to bring virtue to society - this is in part due to the fact that they arose at a time when charitable organizations were also on the rise. Unlike charity, however, the mutual savings banks wanted to teach the poor to help themselves rather than to depend upon the help of others - they encouraged financial and personal independence through disciplined and hard-working lifestyles. These lifestyles also had to be thrifty. These things are all proponents of the idea of individualism, in which self-reliance and independence are virtues unto themselves. As the United States grew, the banking needs of Americans also grew. When the population became more spread out, people need savings and loan associations and stock savings banks. Mutual savings banks slowed their growth as commercials banks became more popular. However, they continued to grow and reached 637 banks with three billion dollars in deposits by 1910. Their success was attributed to the values associated with them: self-help, self-governance, fraternalism, mutualism, and patriotism. People who were burdens to the state and were not economic were considered to be immoral. The banks hoped to create stable and independent individual who would not rely upon the government; rather, they would rely upon themselves. Thrift was the only way for the mutual savings banks. Americans were taught thrift in literature, campaigns, and schools that were all funded and sponsored by the banks. Thrift almost took on a theological aspect. Today, however, American values have changed in a way that does not support the mutual savings banks. The bank failures of the Depression, new government regulations, competition from other banks, and the loss of the virtue of thrift eventually led to the demise of the mutual savings banks.