define('WP_AUTO_UPDATE_CORE', false);// This setting was defined by WordPress Toolkit to prevent WordPress auto-updates. Do not change it to avoid conflicts with the WordPress Toolkit auto-updates feature. The Secret to Having Money! | Good Cents - The PocketSmith Magazine

The Secret to Having Money!

Monday, May 25th, 2015 by Lisa

Many people think the key to being able to save money for the long term and your retirement is directly related to how much you earn. However according to a study of saving behavior by economists Steven Venti of Dartmouth and David Wise of Harvard, more than 75% of respondents said they knew that their savings, specifically for retirement, were insufficient.

That’s a big percentage but even more surprising was they discovered that how much you earn has very little to do with how rich you are. Venti and Wise divided the 7,700 households they studied into 10 income groups. The top 10% of the lowest income group had saved more than $150,000 per household. Meanwhile, middle-income folks, on average, had only $45,000 in assets. Whilst the study was in America the results would be very similar if it was run in NZ.

Some of their key findings were:

1. There’s a huge variation in wealth at every income level. Many low-income families have almost nothing. But the same is true of many high-income families.

2. Income alone doesn’t explain wealth disparities. Some of the lowest-earning households had managed to accumulate significant wealth.

3. In fact, income differences explain just 5% of the wealth dispersion the researchers found.

4. What the researchers called “chance events” — inheritances, medical bills, marital status, and number of children — explained about 4% of the dispersion.

5. Investment choices explained about 8% of the variations.

6. In other words, the vast majority of the differences in wealth had nothing to do with income, chance events or investment choices.

7. What did explain most of the differences in wealth? Venti and Wise concluded it was this: How much the families chose to save. Those who made it a priority to save built wealth, regardless of their income level, individual circumstances or choice of investments.

The bottom line is that the research clearly shows we have little excuse for not saving. What Venti and Wise found to be the most significant savings factor was no more jaw-dropping than this: Ya just gotta save it!

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