Reverse Mortgage Guide

When it comes to savings Americans have flunked Economics 101. As a nation we don’t save.

Figures from the Bureau of Economic Analysis show that personal savings amounted to $72.2 billion in July, 0.7% of disposable income and not a lot in the context of personal income worth $11.7 trillion. However, the BEA points out that “saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods.”

So, for example, if you finance the purchase of bean sprouts, printer ink or a full tank of gas with money from a reverse mortgage or credit card you’re actually reducing your net worth. Why? The money spent did not come from current income, it came from a loan which ultimately must be repaid. With interest.

Savings. What a concept.

My daughter — who has just begun her career — called recently to ask how much of her weekly paycheck should be saved. Something every week, I said, and more is better because you’ll invariably need savings for emergencies, lost jobs, the down payment on a house, investing or a special treat.

The need for reverse mortgages would be far less if only people began to save at an early age. That’s something to pass along to the kids.

This entry was posted on Tuesday, September 18th, 2007 at 3:39 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.