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What’s in your savings account?

Greg Peck
Janesville Gazette (WI)
Feb 2, 2012

I got a news release by email Tuesday that was disconcerting and a bit surprising.

More than one in five Wisconsin households—22 percent—are “asset poor.” That means they have little or no financial cushion to hold them over in the case of job loss or if some other emergency leads to a loss of income. That's according to a report by the Corporation for Enterprise Development, based in Washington, D.C.

The nonprofit group’s 2012 Assets & Opportunity Scorecard ranked Wisconsin 20th overall among states for how residents here fare in terms of achieving financial security across 52 measures in five issue areas. Many Wisconsin residents have jobs but lack enough savings or other assets to cover expenses for three months if they lose a steady income.

Asset poverty, the Scorecard’s signature measure, is a conservative estimate of financial security because it counts all assets, including a home, that might need to be liquidated to pay for day-to-day needs. A more realistic measure of resources available to families is “liquid asset poverty,” which excludes a home, a car and others assets that aren’t easily converted to cash. Excluding these, and the liquid asset poverty rate for Wisconsinites jumps to 33.2 percent.

The news release reminded me of a powerful message from Froma Harrop in her column we printed Dec. 29.

“Frugality used to be a central middle-class theme,” the nationally syndicated columnist wrote. “What happened to it? We now read the stories of middle-class families in free fall because they lost a job and had no savings. Back in the mists of time, there was a rule about setting aside six months of salary to cover a possible job loss. Not only did the middle class stop saving, but it famously borrowed to maintain extravagant living beyond what its stagnating salaries could support.

“Middle-class Americans used to throw ‘mortgage burning parties,’ when, after 30 years, they finally paid off their home loans. They understood as long as they had a mortgage, they were not full homeowners.

“But come the housing bubble of the last decade, middle-class people no longer viewed their rising home prices as mere whipped cream on a prudent savings plan. They saw a higher value as the main course to be quickly devoured by borrowing against it. Now Americans’ equity in their homes (the home’s value minus mortgage) is half what it was in 2006.”

On Tuesday, I bounced that Corporation for Enterprise Development report off Harrop by email. She felt the same as I did—that you’d think more Badger State residents would be in better financial position given our Midwest values.

What does it say about us that we’re not? Are we now lumped with the middle class across the United States in being reckless with our money and in lacking frugality?

Greg Peck can be reached at (608) 755-8278 or gpeck@gazettextra.com.

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