Measuring
The Nation’s Wealth-building Progress With The Nest Egg
Score
by
Pamela M. Adams
A.G. Edwards & Sons, Inc.
When it comes to personal savings, we’re not doing such a good job. As more and more people build up higher balances on their credit cards and take out loans to finance things they really can’t afford, the level of savings in our country has dropped to record lows. But despite all the negative news you’ve probably heard lately, there is a glimmer of hope in the facts and figures behind a new wealth-building performance measure from A.G. Edwards.
Recently, our firm conducted data analysis to get a better picture of how well U.S. households are doing at accumulating personal wealth. The results were compiled and tabulated to come up with the second quarterly release of what’s known as the Nest Egg Score. According to the report, Americans are doing a “fair” job of building their nest eggs.
Similar in appearance to the familiar credit score, the Nest Egg Score is a three-digit numerical rating that represents a measure of the relative strength or weakness of our wealth-building performance as a country. The score for June was 631, landing us at the upper end of the “Fair” range, which runs from 550 to 649. The possible score ranges start with “Poor” (450-549), and also include “Good” (650-749) and “Excellent” (750-850). As a point of reference, the inaugural score for March was 648.
The Score measures a dozen statistical factors in all, each reflecting either saving and investing activities or the economic environment that affects the ability of U.S. households to build personal wealth. Compiled using nine government measures, the Score supplements that information with three additional questions from the firm’s own proprietary survey.
So what can we learn from this score? Well, for starters, there are a few positive takeaways that should be encouraging to those who might want to use this as a reason to recommit to good savings habits. Over the past several years, many people have seen benefits from appreciation in both home values and the stock market. In addition, a favorable job market has pushed the unemployment rate down to the lowest level since 2001. These factors have contributed positively to the current state of our cumulative personal wealth.
On the other hand, with the good there always comes some bad – as evidenced by the fact our overall score reflects only a “fair” rating. You’ve probably seen it broadcast on the news that the personal savings rate in our country is currently negative, meaning we’re spending more than we make. Rising inflation has also been a concern in recent months, and the survey also revealed a poor outlook on future savings prospects. Each of these factors has helped to drag our overall score down.
While there’s plenty of room for improvement, the results of this second survey are by no means a reason to fret that hope is lost. In fact, there are several things we can do to get on the right track with our savings and help boost that score. A few simple steps could produce positive results and help to reverse the negative trends that have been so widely publicized lately.
One of the most important things to remember is that it’s never too early – or too late, for that matter – to start saving. No matter what stage you’re at in your life, commit now to begin a savings plan if you haven’t already. To go along with that goal, make a concerted effort to reduce your debt, especially if that’s one of the things that has been holding you back from saving. While the “buy now, pay later” philosophy is tempting, this is one of the main problems that has contributed to our poor savings habits.
To help get you started on the road to savings, check out NestEggScore.com and fill out the Nest Egg Score Estimator, an online tool that can help you estimate your own personal progress in building your nest egg.
A.G. Edwards generally acts as a broker-dealer, but may act as an investment advisor on designated accounts, and the firm's obligations will vary with the role it plays. When working with clients the firm generally acts as a broker-dealer unless specifically indicated in writing. To better understand the differences between brokerage and advisory services, please consult “Important Information About Your Relationship With A.G. Edwards” on agedwards.com. This article was provided by Pamela M. Adams, Irvine, CA , A.G. Edwards & Sons, Inc., Member SIPC. For more information see www.agedwards.com/fc/pamela.adams.