Food Storage versus Financial Savings: It Really Shouldn't be Either/Or

Food Storage versus Financial Savings: It Really Shouldn't be Either/Or
by Richard P. Halverson

Recently the First Presidency of the Church sent a letter to be read in sacrament meetings. The letter encouraged members to increase their personal preparedness in such matters has food storage and finances. In our ward the letter prompted considerable discussion about food storage. Some wondered how many church members could survive a month without making a trip to the grocery store. I wondered how many church members could survive a month without a paycheck.

Economic numbers released regularly by the Federal Reserve and other agencies have for years reflected a picture of Americans borrowing more and saving less all the time. In the aggregate they paint a picture of a society living dangerously beyond its means. But these are more than just big picture numbers. Behind all the numbers are millions of individuals who have worked themselves into a position of financial stress. I am not aware of any public numbers regarding members of the Church. However, it is fair to assume our members are moving in the same general direction.

The above chart reflects the dramatic decline in savings among Americans. In 1979 people were saving over 10% of their disposable income. Today that number (despite a brief 9/11 spike) is under 1%. At the same time total consumer debt to disposable income has risen substantially in the past twenty years as indicated in the following chart.

The main culprit in this gluttony of debt is the credit card. The following chart shows the percentage of revolving debt to non-revolving consumer debt in the country. Revolving debt is primarily credit card debt. Non-revolving debt includes things like home mortgages and auto loans.

Credit card debt is particularly problematic. It is designed to give the debtor considerable flexibility in repayment. For example, the cardholder can pay the entire bill or make a minimum payment. Flexibility is nice if the cardholder is also disciplined. However, if the cardholder works herself into a position of being maxed out on all his cards and making just the minimum payments then real trouble is brewing. Monthly payments go mostly to interest and hardly reduce the debt at all. Additionally, this rarely happens with a single card. Credit cards are very easy to get. In fact, banks push them on us. Banks push them because the interest rates are high and in many many cases people are mostly paying interest as I just described. That is quite profitable for the bank. But it is extremely tense for the debtor.

I began by drawing a simple analogy between food and financial storage. I doubt that either the citizens of the Country or the members of the Church are doing very well on either. May I say that the looming financial mess may be the most serious. Now in saying this I want to be very clear I absolutely sustain the First Presidency's encouragement to Church members to improve their emergency storage. Nothing I am about to say should be interpreted differently. As a matter of fact food storage is a wonderful form of savings -- except for the fact that it doesn't earn interest. But, of course, in a real emergency with collapsing financial institutions all around, you can not eat interest.

Here is my concern. We store food for an emergency. That emergency may never come if we are fortunate. It is a little like having insurance. You actually hope you will never have to use it. You actually hope there never will come a day when you can not get to the grocery store for a month.

When it comes to financial savings, however, it is a fact that nearly all of us will face a financial emergency of sorts. Nearly all of us will face a time when we must not only go a month without a paycheck but years without a paycheck. That emergency is called retirement.

Retirement is something that must be saved for during a person's working years. It is also important to start saving as early as possible to take advantage of the growth and compounding of financial assets. The statistics in this article reveal that as a nation we are doing just the opposite! Debt is the opposite of savings. Not only have savings that earn compound interest dropped to almost zero, debt that effectively pays compound interest has risen dramatically.

To make matters worse demographically there is every reason to believe these statistics should be going the other way. We have all heard of the great post World War II baby boom. The "boomers" are now in their 50's, barely ten years from retirement. Historically, young people acquire a lot of debt in their 20's and 30's. This is a period when they are buying homes, cars and having children. Then historically they payoff their debts and accumulate retirement assets in their 40's and 50's. There are enough baby boomers that they have jiggled every economic statistic since they were babies. If they were now repaying their debts and increasing their savings as they are suppose to historically do in their 50' the charts above would look different. I think there is a lot of concern many of these "boomers" are nearing retirement with considerable debt and few assets to live on.

These are all broad statistics. They may or may not include you. The Brethren have counseled us relative to our food storage. They have also counseled us to stay out of debt. As with all things there is great safety and peace of mind in following the brethren. Even a year's supply of food won't get you through twenty-five years of retirement.

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