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Sunday, October 12, 2008

Needed: A Mass Marketing Campaign on Savings and Frugality

I finally read an article in Business Week that nicely stated what I have been saying to my husband for years now:

*The negative savings rate in this country is going to ultimately hurt the economy. The Business Week article stated that a positive savings rate will eventually strengthen the economy. Another Business Week article predicts that hit number 2 to the financial institutions will come when massive amounts of unsecured debts from credit cards is unable to be sold and will be written off.

*This nation needs to *market* good old fashioned saving as "cool." The Business Week article mentioned the success of the the Just Say No campaign for smoking and other government marketing campaigns as models to emulate.

Turns out frugality is making a comeback as families who have been living beyond their means get their wake up call. The Business Week article titled "The New Frugality" profiled a family that got their wake up call that frugality was a necessity when they went to sale their home, which had doubled in value, and only pulled out $60,000. They then realized that they had eaten nearly $200,000 of equity on consumables.

(Hat Tip: Dave) The New York Times has an article this week, The Frugal Teenager, Ready or Not which shows teen discretionary spending is dropping (My word! At the peak the average US teen had been spending more on discretionary items than we do as a family). For teens that are unaccustomed to hearing the word "no" the new economic reality is going to be a bumpy ride.

For the first quarter in 17 years, consumer spending has not grown and is in fact negative . (Stop and digest this figure for a moment please). An entire generation of teens and young twenties has lived an entire lifetime without a period of time where cutting back was on the national agenda. This is really incredible the more you think about it. Marketing is powerful (with a capital P) and this generation has lived during an era of buy now, pay later, creative and even more creative financing (ARMS, interest-only, nothing down), "your home as an investment/piggy bank/ATM", "housing always goes up," leverage your credit to invest, etc, and now we as a nation are getting a taste of (great) grandma's personal finance rules.

The Washington Post had an article on consumers' changing habits which is no Tightwad Gazette, but perhaps more a demonstration about how weak the frugality muscles have become. Buying what you "can get some use out of" seems more like common sense than thrift. There is a story about a mother checking out books for her daughter instead of buying them new, a grandmother paying for her grandson's *Stride Rite* pair of shoes because the mother can't afford them (my husband would like to point out that putting the burden on someone else is in no way an exercise in frugality), and a college sophomore watching tv instead of buying (not renting, buying) movies, certainly underscores the fact that a mass marketing campaign on frugality and saving is in order.

Readers: If you were designing a mass marketing campaign on savings and frugality, where would you start? What slogans would you use? What points would you drive home? And, to keep with the Ortho part of the blog, what messages does the Orthodox community need to hear most?

Bonus: If anyone puts together a quality commercial of their own as a digital file, I will feature it on my blog if you tell me how to do that (sorry, I'm technologically challenged).


tesyaa said...

I was excited to see the NYT article since it seemed so relevant, yet the teenagers profiled seem so far from my kids' world that there's almost no comparison. No $100 per week allowances here to cut back. And those kids balking at thrift store jeans don't have anything in common with my family, where bargains from eBay are commonplace.

Dave said...

Come up with the list of needs. The things you cannot do without.

If you are fortunate, your income will cover those. If you are unfortunate, you either need to find a way to reduce the costs of your needs, or a way to increase your income -- there are no alternatives.

Out of what is left of your income, put money into savings. You need to have liquid reserves for emergencies.

What is left is available for things you want. Now, unless you are in very rarified company indeed, you will have more wants than needs. I'd strongly advise leaving yourself flexibility here (so, for example, you can get the occasional impulse want). It is certainly a good idea to look at the utilitatian values of wants (for example, a good quality chef's knife is a "want", but it is a far more utilitarian want than a similarly priced folding knife, for most people).

Finally, you need to be pretty ruthless on needs versus wants, especially the first time through.

As an example, for those who are observant, Kosher food is clearly a need.

Meat is a want. Meat every meal (or even every day) is certainly a want.

Dave said...

Sorry, that should be "unless you are in very rarified company, you will have more wants than you can afford". Most people have more wants than needs.

SephardiLady said...

Tesyaa-Agreed. Worlds apart.

JLan said...

"a college sophomore watching tv instead of buying (not renting, buying) movies"

As a note- Blockbuster will often have 4 for $20 on previously viewed movies. These are generally movies that were fairly popular, that is, it's Blockbuster selling the extra DVDs that they got to rent when the film first came out, but that they have no need for anymore. Considering the price of movie rentals these days, that may actually be worth it. Buying movies new, however, is rarely worth it.

Tamiri said...

I would love to see something along the lines of the Visa/Mastercard ad: "Living Debt Free = Priceless"

I would have ads showing parents teaching that frugal is cool. Waste not, want not. Things along those line.
By the sweat of your brown shall you eat bread.

Along those "cool" lines: a buddy of my 9 yo son decided he loves our challa (DS takes the leftovers along to school, along with a little container of honey). The buddy requested the recipe, which I gladly provided. Not that his mother had ever made challa, but the child was willing to have his mother try :-). So, on Shabbat my son was over there and when I asked him if the mother had made the challa, he said "no". But, "she asked how old you are". I'm going on 46. When he told her that, she said "ahh, now I understand: she's 'old', that's how she knows how to make things like that" 8).

BTW, my husband has been out of a job since Jan, with the salary being paid thru the end of Feb. Being frugal has made our lives a breeze. We have found things we can give up, and more things we can make at home. Grocery bills are down. We can manage most of the time without a car (we have a borrowed one but gas is a fortune). Also, not owning a home takes a big load off worrying about home repairs and paying the mortgage. The kids are so used to their "cheap" parents that living without an income is no big deal for them. We say no to a lot of things and they deal with it just fine, or so it seems. Start when you have money: don't give in to silliness, save whatever you can, make what you can at home by yourself and stay in good terms with family who can help :-)

Tamiri said...

That should be sweat of your brow, of course

SephardiLady said...

Tamiri-Love the "Living Debt Free: Priceless" tag line.

I think a short commercial showing a frugal family with an unemployed family member around the table relaxed because they have safety net in place (savings, a non-income earner who can take a bit of work here and there, etc), and contrasting it with the next door neighbor's table where there is too much debt, not enough savings, and high liabilities. That would be powerful!

I also like the "by the sweat of your brow" which could emphasis that work has dignity, even if one doesn't find large doses of fulfillment or respect in their word. The dignity comes from integrity and pride in supporting your family.

Tamiri said...

SL, your middle paragraph described us. I am laughing as I write. We not only have our safety net, (though the current market does cut the number of years we can survive without a job about in half, and dashes our hopes of buying a home in the near future), but we have not yet borrowed, which is also an option in hard times. Hopefully, there is a job out there, waiting for my husband to sign on the dotted line in the next few weeks.
And, we ate lots of legume dishes for Yom Tov. It was still very festive.

rachel in israel said...

tamiri, your story about the age made me laugh. I'm 27 and not only make challah nut also babkas, cakes, stuffed cabbage, almost all foods from scratch. and almost any recipe that I decide to try. what does that make me? a reincarnation of an old soul in a new body?
I guess that's why I don't get along and can't relate to my peers in age regarding discipline and food issues. The other day I told my husband that I prefer the company of women 15 years older than me. Thank you for finaly letting me see the truth!!

the rabbi's wife said...

My recommendation to most OJ families would be to save a percentage. Start with 1% of your income. Don't put it in a bank. Put it in a Money Market Account (much higher return rate than a bank). If you increase your percentage ever month, 6 months, whatever, eventually the sum in the MMA will be quite large. next step, re-invest the interest. once the amount in the MMA brings in half your monthly income, one parent can quit working (or the worker can go half-time) and all the income from it is passive. never touch the principle, and live on the interest.
This works. We do it. My husband is in Kollel and I sew at home for "fun money".
We also eat frugally. Eggs are a great source of complete nutrition (so many vitamins, too many to list), filling and cheap. We eat a lot of eggs and milk. Wholesome and cheap. What could be better?

Ariella said...

One note of caution on the advice above: money market accounts unlike savings and CD accounts are NOT FDIC insured. So if the bank should fail -- a real possibility in today's climate -- that money is not guaranteed.

ProfK said...

The MMA comment has me puzzled. Assume a high salary for a youngish couple--$80K per year. At 1% put away a month that would give them only $800 a year plus accrued interest, which is not high in today's financial market. Unless someone else is supporting that couple totally it is going to take them, at 1% savings per year, most of their life to save enough to give them an income that can actually be lived on.

Even if they put away half of their after tax income--let's say $32K a year and not counting interest--it would take them 20 years to save $640K, assuming all their expenses remain exactly the same so that savings remains the same. The general rule of thumb is that money in a savings vehicle, at 5%, will double in 12 years. Which bank is giving 5% interest on an MMA right now? Even if interest swelled that $640K to one million dollars, at today's interest rates that would give the couple $10-30K a year in interest before taxes, not a sum a couple can live on comfortably and certainly not one a family can live on. Nor was a mention made of children, and the high expenses that having children bring with them.

Unfortunately, eggs and milk are no longer cheap, nor, as the basis for a prolonged diet, do they provide sufficient of the necessary nutrients.

In short, I'm not buying the idea that a couple with children can live off of the interest of an MMA, at today's interest rates,with no other steady job income coming in, unless that MMA is in the multi-million dollar range.

SephardiLady said...

ProfK-I'm also puzzled.

Anonymous said...

No need to be puzzled. It is simply wrong, and it's wrong even before taking into account that money market funds (MMF's) barely even keep up with inflation over long periods of time.


Dave in DC said...

I don't think that you can start with your expenses and then save what's left. One needs to save first and live on what's left, otherwise, expenses will always grow to fill the vacuum of unused income.

How about a "Pay Yourself Maaser" campaign? Anyone who's not saving as much as they're giving to maaser is likely to end up needing to get back the tzedaka they just gave anyway.

Anonymous said...

Yeshivas often have midos campaigns but what about a midos campaign for cutting down on being baal tashgis (wasting)? When we make a yomtov with 4 salads and 3 kugels and 6 deserts, how much goes to the garbage? Kids bring huge snacks and lunches and much of it is thrown away. What do we do with clothes we no longer wear? Do we shop to relieve boredom? Do we overheat the house or waste paper? Involved parents can spearhead midos campaigns in day schools that might spill out to the rest of the community. Waiting for others to do things is waiting in vain. Appoint a child in the house to be the "lights captain". He gets a dollar a week if he turns off the lights in rooms where no one is using them. Shop in your closet. Chances are that something you bought in the past can be part of a new combination. Preventative dentistry and health care can avoid future big expenses. Even if you live in a suburb, buy a cart and shop on foot. Don't use 50 gallons of water to wash each dish. All of these things can be part of a yeshiva anti waste campaign.

SephardiLady said...

At my children's school the last out of the room turns out the light. . . no payment needed.

I like your idea of making this into a midot campaign. Couldn't agree with you more about how much food gets wasted Really sad.

SephardiLady said...

Dave in DC-Great slogan.

Some of my readers belong in marketing!

ProfK said...

Re the 4 salads, 3 kugels and 6 desserts, they only get wasted if you 1)don't plan ahead and 2)don't utilize your freezer. Salads? Served for more than one meal, available for a snack motzai yom tov and taken as part of lunch on chol hamoed or after yom tov. Kugels? Half in the freezer before it even gets served to be used for a regular shabbos meal and any leftovers from yom tov frozen in individual foil packets for when you are serving a side and someone wants something else, or when someone is getting home way later than dinner time and needs a side. Desserts? I admit I make fancy desserts quite rarely. I normally serve cut up fresh fruit and melons with a frozen ices or perhaps a slice of coffee cake if anyone wants it. "Fancy" desserts are only for special occasions like birthdays and such. And since my family knows there won't be a menu's worth of desserts they eat their fill from the main courses, hence far less waste.

Sounds more like leftovers are not coveted in houses where they get thrown away. In our house there are no leftovers--we call them "cook aheads." Not only are the cook aheads valued for busy working people but my kids who do not live in my house love to take them home because it's saving them time and money.

SephardiLady said...

ProfK-Like you, little goes to waste in our home. But I know that it isn't the same in many homes in which case people need to either learn the tricks of the trade or cook less.

Tamiri said...

I have not thrown away a single item, besides a few 2 week old wilted scallion parts, for the whole chag. Every kugel, as Prof write, is immediately divided into 2: one for now, one for the freezer. All raw chicken was frozen into meal-sized portions, as was the double batch of cabbage and meatballs, turkey meatloaf, baked turkey breast etc. Every grain dish is also divided into: to be eaten now and to be frozen for later. We had melon, grapes and pomegranates for dessert along with slices of cake which are stored in the freezer. Leftover challa turned into challa kugel for a couple of meals (I don't like to refreeze bread, and my challa usually comes out of the freezer). Totally no waste, and totally not much more on the grocery bills than a regular month. I track diligently and since we are on "save" mode, we simply ate less expensive food (no meat roasts), bought no treats (I made every single thing besides chummus spread from scratch) and relied heavily on filling but inexpensive grains and vegetables, even serving 2 kinds of cabbage salad (goes far, not too expensive and can stay for a few days) at one meal. We are probably all going to need to be saving, the world over, and now is as good a time as any to move into frugal behavior.