Americans have a well-documented problem with saving. The average personal savings rate (according to data from the St Louis Fed), is almost back down to levels seen just prior to the real estate bubble bursting and subsequent stock market crash of 2008-2009. Here’s what the average personal savings rate has looked like in the US (on a monthly basis) from 1959.
Amazing, isn’t it? Even with the horrible recession, the personal savings rate bounced only back up to levels last seen in the early 90’s.
Now, I’m not an economist (though I have a friend who is one if that earns me any economic street cred), and I’m sure there are plenty of systemic reasons that have contributed to the drop in personal savings rates. This Room For Debate piece from the NYT back in 2011 discusses a few different reasons, like the lack of pensions, stagnation of the median income and the lack of enough tax incentive to save. These might all be perfectly valid arguments – I don’t have the desire or economic policy know-how to really say one way or another.
But I think there’s something more subtle going on that affects us all on a more personal level – vocabulary.
I know, you probably haven’t had a vocab test since middle school, but luckily the vocabulary I want to talk about today is deceptively simple. Just one word, in fact. Saving.
I don’t like the word. You could even say I have beef with the word “saving”. It’s imprecise, and as a math person, imprecision annoys me. But I can deal with imprecision. It’s the fact that the two accepted definitions and usages of the word “save” have nearly opposite intent that bothers me the most.
Let’s look at the two meanings.
Defn 1 – To add money to your accumulated holdings. “I earned $10 last month and spent $9. I saved $1 this month!”
Defn 2 – To not spend as much as you theoretically could have. “These jeans were marked down from $90 to $89! I saved $1!”
So in definition 1, your bank account grows. It’s about safety and security and planning for some unknown future. This is my grandmother’s definition of what it means to save. And my definition of choice.
But what about definition 2?
There are a few reasons that I don’t like definition #2
First, in definition 2, your bank account shrinks. That’s the exact opposite of definition 1. You have to spend to get the kind of “savings” in definition 2, and the common marketing slogan “the more you spend the more you save” starts to smell a lot like the lottery’s famous theme, “You have to play to win!” [See one of my favorite xkcd comics for a great visual example.]
What definition 2 is really about is discounts. But the idea of a discount is based on the fact that there is some fixed price that is the value of an item. But if we’ve learned anything from Warren Buffet it’s that Price ≠ Value.
So price is a bad way to measure a discount (and inherently “savings”) to start with, and it only gets worse when you consider how easy a reference price is to manipulate these days. From just a quick search, here are just a few companies accused of price inflation to increase the appearance of discounts: Gilt Groupe, Kohls,JC Penney and Overstock,Groupon and Living Social.
And lastly, definition 2 is dangerous because its ill effects are repeatable. You can get the same $10 savings (discount) multiple times, but all you’ve done is increased the number of spending occasions (and the amount you’ve spent.) Contrast with how many times you can deposit the same $10 bill into a savings account – once. There’s no tricking yourself that you’ve doubled your savings because you can only do it once for each savings amount.
Not Incorrect, But…
The dictionary says these are both valid ways to use the word save, so our old Language Arts teachers can’t be upset with us for mis-speaking. But the fact remains that by using the same word, we are (as a society) a bit in danger of conflating the two ideas. And that is a disservice to ourselves.
So my new challenge to myself (and to anyone else who wants to take it) is to remove definition #2 from my lexicon and focus on definition #1 alone. I want to eliminate spending from my mind when it comes to saving.
Who’s with me on my boycott of definition #2? Any other multi-definition words that get us into trouble?
And does anyone know if this is unique to English or if other languages have two separate words? (I think German uses the root sparen for both definitions… Pauline – how about French? Ivy – your native tongue?)