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A penny earned is a penny spent

Credit used to be only for durable items - homes and cars. Now credit supports American lifestyles. No wonder savings hit a historic low. What can be done?

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People intend to save, Mr. Bilker finds. "It's everyone's goal. They just don't do it. People are confident. Their home price has increased. They feel it's safe to spend. They're banking on future earnings."

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Cindy Lenox has good intentions. She runs a women's fitness center in Shrewsbury, N.J. She opened a savings account last month, hoping to deposit even $5 a week. It hasn't happened yet. "I own my own business, and there are weeks out of the month that I don't get a paycheck. For me, retirement is nonexistent. I think I'll be working for the rest of my life."

Gail Cunningham, a vice president at Consumer Credit Counseling Service of Greater Dallas, sees varied attitudes among her clients.

Some tell her it's impossible to save. They rely on credit cards. Others defend their spending, even in a financial crisis. "They have to have cable TV, a cellphone, and their nails done," Ms. Cunningham says. Others open savings accounts but pull out money faster than they put it in. Without a nest egg, they cannot plan. "When they're worried about their car being repossessed tonight, the last thing they want to talk about today is their retirement savings."

Cunningham has watched people's definitions of "need" and "want" change. When they get a raise or bonus, the first thing most think about is how to spend it, not how much they can earn through savings and investment.

Changing attitudes is essential, retirement experts warn. As Social Security and defined-benefit pensions become less certain, and as life expectancies increase, the need for personal savings, including 401(k)s, will grow.

"People just do not have any idea what it takes to retire," Mr. Frank says.

One solution: mandatory 401(k)s

Most companies offering 401(k)s make participation voluntary. Some experts want enrollment to be automatic, although workers could refuse. Businesses using this format find that few people opt out.

"I don't think we have the political will to make it coercive, but switching 401(k) from opt-in to opt-out really takes care of a good deal of the problem," Dr. Mandell says. "People are very grateful. When you give them a structure, they're going to save."

Jeff Seely, CEO of ShareBuilder.com, an online brokerage firm, offers other ideas to promote savings: "Do not let people borrow against their 401(k). This is your retirement money. Don't touch it." Those who change jobs should roll over their 401(k) into an IRA or the new employer's plan. Fifteen percent of people who leave jobs cash in their 401(k) when they leave, Mr. Seely says.

Claire Celsi, a supervisor for an advertising firm in Des Moines, Iowa, also wants changes in banking practices. A single parent, she lives from paycheck to paycheck.

"The people who already have money are the only ones who get advantages - free checking, better interest rates on credit cards," she says. "The fragile consumer, which I consider myself to be, gets kicked when they're down. Missing one payment can take your whole balance and charge you astronomical interest forever."

A late credit-card payment could raise the interest rate to above 30 percent, Bilker notes. Some late fees now cost $40.

Even lawmakers could help. "If the federal government continues to be in debt, to borrow to live today, why should the citizens not emulate the government?" Gupta asks. "They need to set the example by putting their fiscal house in order and encouraging citizens to do the same thing."

As in many areas of life, education is crucial and can begin at home. Greg Turner, a vice president of an audiovisual company in Denver, saves 4 percent of his salary, beyond his investments and retirement plans. "I inherited the attitude about saving from my parents," he says.

Although the negative savings rate is bad, Boss says, spending is healthy for the economy as a whole. "Nobody is trying to say we should hoard money or lock it up. You want money to circulate. You just don't want to spend more than you're making."

Bilker offers his philosophy: "Living modestly and being happy with what you have - therein lies the success of saving."

For Davis, having a nest egg provides peace of mind. "Saving is one less thing I have to think about or worry about. Any money I spend is money that I can spend, and not money I should be putting away."

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