My research is well underway at this point, and I've come across some very interesting topics that I plan on incorporating into my overall essay on savings. One topic I'd like to include is credit cards. Credit cards have entirely changed the landscape of money in the past few decades, enabling people to spend well beyond their means. Here are some facts about savings and credit cards (taken from Dan Ariely's Predictably Irrational) from right before the economic crash:
Average American savings rate in 1994: 5%
Average American savings rate by 2006: below 0
Average European savings rate 2008: 25%
Average Japanese savings rate 2008: 50%
Average number of credit cards per family: 6
Average debt on credit cards per family: $9,000
Percentage of households that borrow on credit cards to cover basic living expenses: 70%
I'm hoping to be able to use these facts and apply them to a cohesive thesis about why behavioral economics is so crucial to understanding why Americans are terrible savers, and what this means for the future of the country.
Another example I'll use is retirement savings (focusing on the 401(k) and why people often opt out of it). By using retirement savings, I'll have a solid example with which I can explain savings from a more concrete perspective.
Lastly, I've started reading Ariely's newest book, The Upside of Irrationality. This book is far more psychological than economical, but I'm finding it super interesting (even if mildly irrelevant to my paper topic). Topics include the "IKEA effect" (where you get attached to items if you help build them yourself), why people seek revenge, ideas on beauty, and an analysis of online dating. Interesting, right?
I definitely agree with the idea that credit cards have changed the total landscape of our consumption habits. I do often use a credit card as it is convenient but I sometimes feel that I’m getting lose the sense of how much money I spent. Also, the statistics are interesting as there is a huge difference among saving rates of different countries. I look forward to reading your posts to see why Americans are not good at saving money.
ReplyDelete-Sunny :)
Hm, will you be discussing how the different cultures affect the psychology of how much they save? I'm thinking that the physicality of paper money factors into how much we spend-- like Sunny said. What about less developed nations... are there statistics on what their savings habits are in relation to ours? (I hope thats not totally off topic for you). Definitely interested to see how beauty and online dating.
ReplyDeleteCheers