Savers have the odds stacked against them these days. Deposit interest rates remain at historic lows, and based on Federal Reserve policy, you could argue that the government today wants you to spend more than it wants you to save. As tough as that makes it on savers, it's all the more reason to fight back and insist on beating the odds. In late January, the Bureau of Economic Analysis released new data showing that the personal savings rate in the U.S. was just 3.9 percent in 2012. That's a low level of savings -- until the 1990s, personal savings rates were routinely in the 7-8 percent range. It also represents the second consecutive year in which U.S. savings rates have dropped. Some say this is inevitable. With interest rates so low, where's the incentive to save? The answer is that you have to think longer term. You might not get much of an immediate reward from savings account interest today, but the reward will be having money available when you need it in the future. From that perspective, here are five incentives to start saving more money now.
1. Low savings account rates
Perhaps it's best to start by hitting this one head on. People's instinct is that low savings account rates create a disincentive to save, but from a financial planning standpoint it should be just the opposite. The money you accumulate for retirement will consist of a combination of the money you save and the amount you earn on those savings. The simple fact is that the less you earn on those savings, the more money you have to put into the pot to make up for it.
2. High credit card rates
If low interest rates discourage people from saving, than the high cost of credit cards should really discourage them from borrowing. Unlike savings rates, credit card rates haven't come down much since the financial crisis, and are still around 13 percent on average.
3. Longer life spans
A long life can be a blessing, but it can also seem like a curse if you outlive your savings. Naturally, with people living longer, they are going to need more money to support themselves in retirement.
4. Rising health care costs
The one economic sector that seems immune to economic cycles is health care. There are many reasons for this -- some are demographic, and some are simply a function of how health care is sold and distributed. Whatever the reason, the trend toward rising health care costs doesn't look likely to change, demanding that people have more money available to pay for their medical expenses.
5. Tax advantages
Policy observers like to note that the mortgage interest deduction gives people an incentive to borrow money, but there are also tax advantages for saving as well, in the form of IRAs, 401(k)s and other qualified retirement plans. Americans don't generally don't like the idea of Uncle Sam getting any more of their income than he's entitled to, so that should be an incentive to make the most out of the tax advantages of retirement plans. For many people, it's difficult to be disciplined enough to save money for some future day of reckoning. However, between the Great Recession and an aging Baby Boom generation, people have recently gotten a closer view of what that day of reckoning looks like. That should sharpen the focus on saving.