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Americans Tap Savings to Cope with Economy

Experts advise other measures before depleting nest eggs

By Mark Huffman
ConsumerAffairs.com

November 20, 2008

Personal Finance • Consumer Prices Edge Up In October • Dodd Bill Addresses 'Too Big To Fail' • Study: Four Types Of Consumers Emerging From Recession • States Worry About Federal Preemption In Consumer Bill • Job Cuts Continue To Fall In October • Consumer Confidence Dips in October, But Rises for Holiday Season • Is The Recession Over? • Economy to Affect Two-Thirds of Families This Holiday • Fed Sees Improvement In US Economy • Consumer Prices Rise Slightly In September • Attorneys General Back Consumer Financial Protection Agency • Gold And Stocks: Are Both Dangerously High? • Study: Americans Crave Better Financial Knowledge • Hiring Begins To Emerge Even As Companies Shed Jobs • Economists Say Worst Of Recession Over • Economy May Force Early Retirements • White-Collar Workers Hit Hard By Recession • Fed Sees Recovering Economy • Six-In-Ten Workers Live Paycheck To Paycheck, Survey Finds • Seven Steps To Saving Money • Survey Suggests Improvement In Jobs Outlook • Stocks Still Outperform, Researchers Claim • Employment Prospects Brighten For Jobless Americans • Job Cuts Rise Following 15-Month Low • Little Sign of Inflation on the Horizon • CFA Applauds Plan to Strengthen Key Investor Protections • Consumers Fall Further Behind On Loans --- • More Personal Finance News

Experts advise other measures before depleting nest eggs As the economic slide continues into the holiday season, more Americans are making ends meet by turning to one of their last resorts -- their savings.

A new COUNTRY Financial survey shows people are tapping their savings more now than in July, even after slashing their spending.

"This is a tough time for a lot of Americans, but before using your savings to make ends meet, try to find some other way to cut spending," says Keith Brannan, vice president of Financial Security Planning at COUNTRY, a financial services firm.

"Being financially secure means safeguarding what you've achieved and saving for your family's future, even in tough times. Depleting your savings, whether it's a passbook account or a retirement fund, should be one of the last methods you use to stay afloat, " he added.

A vast majority of Americans are concerned about their personal finances when looking toward the holiday season. Seventy-seven percent say they are very or somewhat concerned about their personal finances as they look to the holidays, with the majority saying they will rely less or about the same on credit this holiday season than last year.

Americans cut spending

Sixty-seven percent say they have cut spending to cope with the uncertain economy, up from 65 percent who took this action earlier in the year.

Sixty-two percent say cutting spending has either significantly (18 percent) or moderately (43 percent) helped cope with the economy.

Reliance on credit dwindles

Fewer Americans (21 percent) are relying on credit to get by than did in July (26 percent).

"Whether it is consumers making smart choices or credit card companies tightening their lending standards, less reliance on credit is a positive thing for Americans," adds Brannan. "If you want to cut spending and credit card use, it's important to have a tangible plan you can follow. If you don't have time or are uncomfortable making these decisions on your own, get help from a knowledgeable financial professional."

Tips to keep in mind for preserving long-term savings:

Withdrawing money from your 401(k) account can cost you more than you might think. In addition to the income tax you could owe, you will have to pay a penalty. Plus, many employers will withhold a percentage of your withdrawal amount for income tax purposes.

If you find yourself tapping into your savings regularly, consider contributing less to your savings accounts temporarily, but don't stop contributing altogether.

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