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.