K-State Research and Extension News
March 09, 2011
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Income Not Always an Indicator of Financial Security


MANHATTAN, Kan. – Today’s economic climate can be a lot like the weather. We, as individuals, aren’t likely to change it, but we can change how we respond to it, according to Carol Young, Kansas State University Research and Extension financial management specialist.



“The tight economy, uncertainty in the job market, and low interest rates can be discouraging, but also an incentive,” she said. “Routine saving, conscientious spending, using credit wisely and identifying both short- and long-term financial goals continue as the cornerstones in the foundation of sound – or, should we say successful –  money management and security.”



Income alone does not, however, guarantee financial security, said Young, who cited a Feb. 2010 America Saves Survey conducted by Opinion Research Corp. that polled households with annual incomes above and below $50,000 to measure savings and savings’ priorities:


 Question:  Below $50,000  Above $50,000
 * Emergency savings sufficient?  52 percent  85 percent
 * Sufficient retirement savings?  36 percent   73 percent
 * Save for retirement at work?  26 percent  70 percent
 * Spending plan allowing saving?  32 percent  56 percent
 * Savings plan with specific goals?  38 percent  68 percent
       

      
In comparing survey results for both groups, Young noted that a greater percentage of participants earning $50,000 or more annually felt they had sufficient emergency and retirement savings.



In comparison, 52 percent of the participants who earn less than $50,000 reported sufficient emergency funds; 36 percent reported sufficient retirement savings.



The disparity in reported retirement savings at work (70 percent for $50,000 and above compared to 26 percent for those who earn less than $50,000) needs more exploration, said Young, who said that it could be due to greater opportunities for higher wage earners to save for retirement at the work place, rather than a lack of interest or willingness to participate among those who earn less that $50,000.



Saving and investing are more likely to happen if included as a priority in the spending plan, just like rent or house payments, yet only slightly more than half of the higher income level participants (56 percent) reported having a spending plan that allowed savings as a priority. Thirty-two percent (nearly one-third) of those who earn less than $50,000 are making savings a priority.



About two-thirds (68 percent) of the respondents in the $50,000 and above income group reported saving for specific goals; nearly 40 percent of those earning less than $50,000 did the same.   



Some may be surprised that those earning $50,000 and above don’t report saving more, while  others may be surprised that those who make less than $50,000 still make saving a priority, the financial management specialist said.



Saving at any income level requires self-discipline, said Young, who explained that basic money management strategies -- planned saving, prudent spending, using credit wisely as a tool and identifying and working toward both short- and long-term financial goals – can benefit all income levels.



More information on saving, spending and money management, including Kansas’ participation in Kansas Saves, a state campaign inspired by the Consumer Federation of America’s America Saves Program is available at local K-State Research and Extension offices and online.

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by: Nancy Peterson
nancyp@ksu.edu
K-State Research & Extension News

Carol Young @ cyoung@ksu.edu