What's Driving America's Savings Fear?
In the following video interview, Linda Shelby, a Merrill Edge executive, sits down with Brendan Byrnes to discuss the most recent Bank of America Merrill Edge Report. The report is a semiannual study that puts the behaviors of mass affluent consumers into perspective. With their numbers at nearly 28 million households in the United States alone, understanding the sort of massive trends that affect these individuals can have powerful implications on your investments. Understanding paradigm shifts like those discussed here are a cornerstone of Motley Fool superinvestor David Gardner's own investing strategy and are critical to his market-thrashing returns. Learn more about how he discovers his winners; just click here now to read more.
Brendan Byrnes: Another one of the main focuses of the study is focusing on saving for college, especially their kids' college. I think one of the interesting things was, most people wished that they had started saving earlier, even up from a year ago.
What do you think is driving that? Is it people that look back and have the benefit of hindsight, and say, "I wish I'd put my money in a 529, and I could ... even an index fund, market returning 7 to 8% S&P and Dow."
Do they look back and say that and wonder, "Why didn't I do that before?" Is that what we're seeing here?
Linda Shelby: They are, and it's two things. They're saying, "Why didn't I start sooner?" and they're also saying, "It didn't cost this much when I went to school."
I live in California, and in California alone the UC schools went up 21% last year in tuition and fees. When you look at outpacing inflation the way that education costs are, it's clearly going to be one of the largest expenses, one of the largest purchases, that a family ever makes in their lifetime, so they're now looking and saying, "I need to start sooner."
What is an important note is that 62% of the mass affluent who have small children, most of them did start -- 62% of them -- did start a plan prior to the child being 6 years old. I think that that's a positive statement. As you've said, doing the 529 plan, the Coverdell Education Plan, something with tax benefits, putting even just a little bit away every month makes a big difference, over time.
The article What's Driving America's Savings Fear? originally appeared on Fool.com.Brendan Byrnes and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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