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News Editorial
Your Savings - Good for You, Your Family, and Your Peace of Mind

By: FDIC Chairman Sheila Bair
Kansas City Star and other publications
Feb. 19, 2010

En Español

When John needed to repair his car's transmission three years ago, he put the $1,000 bill on his credit card. By the time he finally paid off the charge last month at an interest rate of 15 percent, the repair had really cost him a whopping $1,248.

If he had had savings to tap into, he would still be out $1,000 for the transmission. But the other $248 that he paid his credit card company in interest would still be in his pocket. Or better yet, in a savings account that pays him interest.

Putting even small amounts of money into a rainy-day fund to cover emergency expenses or save for future purchases adds up quickly. And the best part is that you can earn a little interest on the money.

There are many ways to start saving. For example, nearly 24 million workers last year received a tax credit, called the Earned Income Tax Credit or EITC, for low- and moderate-income people. The average person eligible for the credit got back more than $2,000 from Uncle Sam. If you used half of that $2,000 refund to buy a savings bond, and it earned 3 percent interest, you would accumulate $1,061 in two years just by letting your money do the work.

Or you could start a savings account with that $1,000 from your tax refund and add $10 a week by cutting out such things as trips to the vending machine and cell-phone features that you don't use. You would have $2,133 over the same two years. This savings habit could be made easier by enrolling in an automatic savings plan if your employer offers one, or asking your bank to automatically transfer a portion of your paycheck into a savings account if you use direct deposit.

Rainy-day funds are essential to cover unexpected expenses or losses in income. Personal savings also allow families to pay for long term goals such as a child's college education or a down payment on a house. In addition, savings are vital to ensuring a secure retirement. They are so vital, in fact, that many employers will match some of the dollars their employees put away for retirement. For instance, if you save $20 a month, your employer might put another $20 into your retirement account.

Money alone can't buy happiness, but research shows that a cushion of savings really can provide such benefits as reduced stress and better relationships with family members.

Unfortunately, many households are not prepared for unplanned expenses. And they are not saving for future goals. According to a Harvard Business School and Dartmouth College survey conducted last year, only a quarter of Americans said they were certain that they could come up with $2,000 in 30 days, meaning up to 75 percent could – like John – have to turn to high-cost borrowing if they confronted a financial emergency.

However, there is some good news from the savings front. The nation's savings rate increased to 4.6 percent in 2009, from an all-time low of 1.4 percent in 2005. Whether this trend of preparing for unanticipated expenses – and big dreams – will endure is up to each of us.

Now is the time to act to ensure that positive savings habits continue. America Saves Week, Feb. 21-28, aims to raise awareness of the need to save money, reduce debt and build wealth. This is a great opportunity for families to take action by starting a savings account and the habit of savings because even a few dollars can mean a lot.

Opening a savings account at a bank is easy and safe, and your money is insured by the U.S. government. If you want to buy a government-backed savings bond, you can do so when you fill out your federal tax forms, at some banks, or directly through the U.S. Department of Treasury at or 1-866-388-1776.

I encourage all Americans to join me and my family in making a renewed savings commitment during America Saves Week, and let's resolve to maintain that commitment throughout the years to come. The recent financial crisis demonstrates the dangers of excessive borrowing and the importance of having resources to fall back on in times of financial distress. Saving money strengthens our families and strengthens our country. Let's strike a better balance between savings and consumption, and borrow only when necessary, to help assure a better financial future for us and our children.

Sheila Bair, the chairman of the Federal Deposit Insurance Corp. since 2006 and the mother of two school-age children, is a passionate champion of consumer protection and economic inclusion. She has long worked to bring underserved populations into the financial mainstream.

The FDIC is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system. The FDIC insures deposits in banks and thrift institutions for at least $250,000; examines and supervises financial institutions for safety and soundness and consumer protection; and works to limit the effect on the economy and the financial system when a bank or thrift institution fails.

Last Updated: July 5, 2011