Banks Urged To Help Americans Save For Future

February 19, 2010 9:11 a.m. EST

Topics: financial and business service, personal finance, economy, business and finance, United States

Tejinder Singh - AHN Correspondent

Washington, DC, United States (AHN) - A concerted effort to prepare millions of Americans to save for their rainy days and prepare for retirement was launched by a host of large banks and consumer organizations on Thursday. Ronald P. O'Hanley, president and chief executive of BNY Mellon Asset Management, was joined by Stephen Brobeck, executive director of the Consumer Federation of America, and Steve Bartlett, president and chief executive of The Financial Services Roundtable, at a National Press Club Newsmakers press conference to address the lack of saving habits by Americans.

"There really is a savings crisis and it ranges from low to middle class families," O'Hanley told the audience of journalists and sector specialists, adding, "They blow out a tire in their car, they need to take care of a leak in the roof, but they have no money to handle that."

"More people in the world today are over 65 than the people [who] ever had reached the age of 65," he cautioned about retirement groups emerging in the coming years.

"Thirty five million people have no retirement plan while a minimum of $52,000 is needed for an average American household to survive," he said.

The speakers highlighted the pragmatic ways the Consumer Federation of America and the Financial Services Roundtable are implementing innovative savings programs that pay consumers to save with "automatic" options and by requiring very low minimum balances.

Out of a total of 21 banks in the group, 16 major banks have already announced lowering their minimum balances on savings accounts, making it easier for people to save without having to worry about getting hit by low balance fees.

The audience was told that US Bank has no minimum savings account balance, while Regions has a $5 balance and Bank of America has a $25 minimum balance.

In the past, the standard minimum savings account balance could be as much as a few hundred dollars, but some banks have lowered their minimum balances to between $25 and $50, O'Hanley said, urging consumers to save with a slogan: "Pay yourself first."

Bartlett, of the Roundtable group, said, "I think we have a responsibility to bank the unbanked, and some days we do a better job at that than others," adding, "This is targeted at tens of millions of families that have a bank or credit union but don't have a savings account."

The financial leaders unveiled

New federal data on Americans' savings rates
Polling on consumers' attitudes towards saving
A new national campaign to increase savings among all segments of society, particularly low- and middle-income families.

The data showed that more than half of families making up to $34,000 have not opened saving accounts while two-thirds of families making less than $19,000 a year lack savings accounts.

Some 42 percent of middle-income families making between $34,000 and $54,000 don't have savings accounts and 20 percent of those making more than $89,000 also don't have savings accounts.

The experts, however, noted that those who have current accounts can be persuaded to open a parallel saving account and, with an "automatic" savings option, start saving for "rainy day" as well as retirement.

To encourage low, moderate and middle-income families, the banks will offer financial incentives for savers, according to the financial pundits.

U.S. Bank, a Fortune 500 company, is offering a $50 Visa gift card for the first $1,000 saved. If the balance is maintained for a year, the saver gets another $50 gift card.

In April, BBVA Compass will start a program that matches up to 6 percent of the funds that customers automatically transfer into savings each month.

The Financial Services Roundtable encouraged its bank members to allow customers to transfer money from checking to savings for free, and said that each of the group's 21 largest banks already do so. The Roundtable chief disclosed that six of the group's members are hitting the streets with ad campaigns in the coming weeks to attract consumers.

The panel called for Congress to propose and pass more legislation to help Americans save and streamline the ongoing efforts to ingrain the savings habit in the American culture.

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