Whether it's a new baseball glove for the family little leaguer or a bigger, more expensive home, Americans are generally O.K. with saving up short-term expenses, even if that means going into debt.
For longer-term needs, especially retirement, the trend goes another way, reports MotivIndex, a Boston-based digital research firm.
"When it comes to savings, Americans are more inclined to set aside earnings for purchases that can be enjoyed sooner rather than later," the company's new study states. "Four out of five individuals do not believe in delayed gratification when it comes to saving, yet that is the message given to most of them through various financial education programs."
MotivIndex notes the financial industry has plenty of room for improvement in getting financial consumers to hop aboard the retirement savings train. "By analyzing the unspoken motivations of consumers, we were able to discover that traditional education methods were ineffective, as consumers considered the messages used by financial institutions to be more like finger wagging," says Jason Partridge, co-founder of MotivIndex. "To truly resonate with individuals, the financial community should start with programs that provides individuals with a reason to save by connecting it to important events in their lives. The bottom-line is that financial institutions must build trust before trying to get people to think about the future."
MotivIndex is hardly alone in noting Americans often turn a cold shoulder toward retirement savings. A 2015 study from TIAA showed that that 24% of Americans said short-term savings, such as for a vacation or household appliances, is their first priority when deciding how to allocate savings. "That's three times the number -- 8% -- who said contributing to an Individual Retirement Account (IRA) is their first priority," TIAA reports.
Financial experts say saving for a way-down-the-road retirement is a mundane task and thus shy away from it in favor of more tangible, short-term savings rewards like hitting the beach.
"Planning for retirement admittedly seems much more boring than saving for a new home or vacation," says Elle Kaplan, the CEO of LexION Capital Management in New York City. "In addition, many of our long-term needs are so far in the future that it's hard to wrap your head around the need to start planning now. When retirement is decades away, it's beyond easy to procrastinate and say, 'I'll deal with it later.'"
The truth is that procrastinating for retirement planning isn't like writing a term paper at the last minute, Kaplan adds. "Because of compound interest, retirement planning gets exponentially more problematic the more you put it off," she says. "Any amount of money invested for your golden years now has years, even decades, to grow."
On the other hand, by investing later in life and playing retirement catch-up, the amount of money you need to invest will be much larger. "That's why I always tell clients they can take small steps to plan for retirement now, rather than climbing a mountain later in life," she explains.
Lisa M. LaMarche, a partner at Milestone Wealth Advisors on Greenville, Del., has an interesting take on the short- versus long-term savings issue - with a physical exercise comparison.
"Reaching financial goals is like hitting fitness goals," LaMarche says. "If we rush into a workout with nothing but enthusiasm and unrealistic expectations, we'll too often end up injured or quitting before seeing any real results."
"It's the same with finances," she adds. "Good intentions with poor strategy can result in irrational decisions that end up derailing our efforts all together. I wouldn't expect to be able to run a first marathon after only casually running a few miles here and there."
"A lack of commitment, setting unattainable goals from the onset or too much focus on immediate results are a few reasons why it can be difficult to achieve any kind of long-term goals," LaMarche adds. "There are better ways to prepare for a marathon than starting out running 26.2 miles your first day."
LaMarche advises "chunking" ambitious goals into realistically achievable steps makes the long haul less intimidating. "That creates a sensible timeline and helps us understand every task involved in achieving the bigger aim," she says. "Mini-goals such as saving an emergency fund or paying off debts can provide a sense of achievement, spurring us on to work even harder. And give yourself permission to celebrate when you reach the short-term goals, but within limits."
Short-term versus long-term. The theory in balancing both is a strong one. But in terms of actual execution, American retirement savers are still falling short.