Business Insider

As individuals and for the nation, we should boost our savings

Patience is a virtue.

We’ve heard this old adage many times, but researchers now find it may make us both healthier and wealthier.

A study published last month by the National Bureau of Economic Research found that people who are more patient live better and have more money. Specifically, the research compared elderly Americans’ willingness to delay financial gratification with the ultimate outcome of their health and wealth.

People who are less patient with their savings and investments — that is, they want these funds to grow at higher interest rates — were significantly more likely to develop dementia, cancer or heart conditions. People who do not expect to get rich quick ultimately ended up with better health and a net worth that was $130,000 higher on average.

If we want to improve lives and expand the economy, we must show more patience with our money.

Economists have known for years why savings raise a country’s standard of living. With more savings, there is more investment in capital equipment and worker training, which in turn increases worker productivity.

Alexander Field writes about this in the “Concise Encyclopedia of Economics.” “The bottom line: If a country wants its standard of living to rise over the long run, its labor productivity has to go up. And for that to happen, it either has to save more or innovate.”

Now we see it may also help us live better and longer.

Unfortunately, we aren’t saving much. At 5.3 percent of disposable personal income, U.S. households save only about half as much as we did in the 1970s, as reported by U.S. Commerce Department.

The Financial Industry Regulatory Authority runs the National Financial Capability Study, which measures a number of characteristics about our “financial capability.” These measures include whether or not we spend less than we make and how much we save for a rainy day.

As a group, Idahoans are spending more than most. Only 34 percent of our state’s people report saving more then they spend, compared with 41 percent nationally.

Now that we know higher savings may actually help us live better and longer, we should pursue more. Policymakers can do their part by removing incentives in the tax code, both federal and state, that encourage borrowing over savings.

Patience is a virtue. We need it, as individuals and as a nation.

Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. This column appears in the Aug. 17-Sept. 20, 2016, edition of the Idaho Statesman’s Business Insider magazine as part of a special section on banking and finance. Click here for the e-edition (subscription required).