“American Consumerism is not only causing more debts, but it is also causing a sharp decrease in saving”. Due to the desire to get more materials things, the amount of money allocated for saving or in saving to be use in the near future will be diverted towards the purchase of latest and newest fashion design clothes, cars, best food etc. Most people today are not concern about the future or what tomorrow will look like in term of survival, but tend to prove some level of supremacy over others by showing off or bluffing, by consuming materials that cost more money showing to others that they are financially equipped.
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As such, the amount of money need to be saved will be used up. Jamie Bentley wrote “In 1973, the average amount of disposable income put into saving was 8.6%, in 1994 it was 4.2% by November 2005, it was negative 0.2%.” Firstly, improvement in technology which started from the industrial revolution plays a major role in the decrease in saving today because it help promote the rise in labor productivity motivating consumers to move into their personal saving to satisfy their desire, in some event, if the cash is not available for purchase, they prefer using their credit cards which will reduce their saving after a particular time frame. The personal income of consumers reduces every per day because the amount of credit scores by consumers on goods and services creates a situation they may be unable to save.
Secondly, the total value of the good and services produced within the economy in an excess amount brings about increase in consumer’s credit. Human want are unlimited and the desire to get more materials increases day after day, which will lead to debts because the consumers want to purchase for family, friends and others. Therefore the increase in consumer credits relative to gross domestic product (GDP) will lead to sharp decrease in saving. Finally, the production of too much credit cards by business initiations has resulted into the sharp decrease in saving.
When materials have been
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purchase by consumers without physical cash but using credit cards, the amount of income earned after work to be used on their families will go towards the payment of debts and they will be unable to save. Generally, the foundation of child is laid by the parents to begin from and build a good future. If parents do not make saving a top priority for their child, life become extremely terrible for them because they will have to start from scratch and sometimes becomes ageing before meeting their goal in life.
Moreover, a sharp decrease in saving will cause national saving to reduce or to be insufficient to support investment which will give rise to economic growth. It will also lead to unemployment because there will be no enough money to give loam for investment which will cause a lot of citizens out of job. To increase in amount of saving or increase consumer savings and reduce the amount of debts, the production of credit card must be reduced, consumers should check their spending by setting a budget to control their purchases, creative informative program by government to educate citizens on the importance of saving and ways to do it and finally production should be at a level of equilibrium with the number of consumers or people within the economy instead of producing excess.See More on Finance