Personal Sustainability

Personal savings rates have declined rapidly over the last few decades and have led to an impending crisis for many families. Baby boomers and their children haven’t adequately prepared for their retirements, causing a major generational issue involving sacrificing on lifestyle, continuing to work into their 70s and relying on their families for support. This crisis has implications beyond retirement planning however.

One thing that I typically ask a prospect is to think back to their first memory of money. My grandparents’ generation would probably have remembered the brutal scarcity of the depression and the lessons that they learned and passed on to their children involved holding on to any job that you can, and not wasting a penny on anything that they don’t need. My parents’ generation remembered those lessons, but experienced an unprecedented level of opportunity, and what they passed on to my generation was a desire to give their children all of the things that their parents denied them. Today the balance between saving and spending is out of balance with the average savings rate in the country sitting at less than 5%, half of what it was just 20 years ago and one tenth of what it is in China today.

One reason that the national savings rate is important is that savings are the basis of economic growth. Our financial system is basically designed to redistribute savings to individuals and corporations who want to grow and having savings gives an individual a say in the direction that we’re growing. Structures like a savings account or GIC allow the average person to lend their savings to a bank, putting the power to choose the direction of economic growth in the hands of the institution.

Today we have new kinds of investment vehicles which give individuals the opportunity to decide where they want to contribute to growth in our society.

• Microfinance gives underserved people primarily in developing countries access to integrated financial systems, including products such as loans, savings and insurance.
• Socially Responsible Investments (SRI) are focused on investing in organizations that take the social and environmental cost of their activities into account. They can be structured as mutual funds or accounts with money management organizations that research and manage investments in a variety of sectors, including but not limited to agriculture, energy and consumer products.
• Direct Investment through an organization such as Kiva (http://www.kiva.org/) allow individuals to target specific ventures around the world for a business loan, and become involved in a one-on-one relationship with an entrepreneur.

Making use of these vehicles for social change require that individuals save, invest and grow their wealth. Directing your savings to an investment that you believe in gives you the opportunity to change our direction as a society. If you believe that what our current system values is incorrect, then savings are one way to exercise your right to disagree.