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[wylies99]

Save or Spend, That�s the Rub

http://www.koreatimes.co.kr/www/news/nation/2009/02/123_38916.html

By Jane Han
Staff Reporter




Kim Ji-hyun, a 35-year-old housewife and mother of two, has recently started feeling less and less confident about her husband's monthly paycheck, with her home value plummeting, layoffs increasing and the cost of living still remaining high.

So being a wise homemaker, Kim has started to save. She goes to the grocery store less often, has discontinued magazine subscriptions and takes her children to eat out less. She also decided that her seven-year-old girl could stop piano lessons for a year or two.

``I realized that saving here and there really adds up, and I could easily cut expenses by at least 400,000 won per month,'' says Kim, who manages about 3.8 million won a month.

Practicing a little extra thriftiness could be helpful for the average mom, but if consumers like Kim who take up the majority of the local economy, all do sp a swift economic turnaround shouldn't be expected, said Park Hyun-soo, a senior researcher at the Samsung Economic Research Institute (SERI).

He exemplified how the contracted consumer spending in the U.S. is hurting recovery in the world's largest economy. Americans' savings rate rose to 3.6 percent in December, from 2.8 percent the previous month, according to the U.S. Commerce Department, a sign that more people are trying to hang onto their money.

``Boosting consumption is a key to economic recovery,'' he said, adding that Korean consumers, therefore, shouldn't dramatically shy away from spending, considering the general economic welfare.

South Korean consumer sentiment rebounded last month from a 10-year low in December, but outlook still remained grim as the global recession began to cut deeper into Asia's fourth-largest economy. Exports fell drastically and the job market continued to shrink in January.

``It's tough to think about general welfare when your own bank account is getting thinner,'' says Kim Yoon-sun, a senior banker at Shinhan Bank. ``That's only natural.''

She said her best advice to her clients amid today's uncertainties is to draw a clear line between the things they ``need'' and the things they ``want.''

Kim said Koreans have long been known to save more than to spend, but recent data indicates that traditional practices have started to vanish.

``At one point, it became dumb to put away money in savings because investment opportunities were plenty,'' she said.

Chang Jae-chul, a senior researcher at SERI, said consumption is undoubtedly the driving force of an economy, but poor personal savings could also drag down the country's potential growth.

``For the wider economy or your personal economy? I think we know what the answer is for many us,'' he said, adding that the government needs to quickly implement stimulus packages, low interest rates and give signs of hope to help fill some of the hole in consumer spending.

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[wylies99]

For foreign teachers, it's an even thornier issue because of the exchange rate.

[Juregen]

The reason why America is in this situation is because Americans DON'T save at all.

Europeans on the other hand, are big savers, and even though some banks seem to be hit by the financial disaster, they seem to be stable, for now.

It is assumed that Consumption drives growth, but it shouldn't be a cancer growth. Growth also needs capital, and capital can only be gained by saving. If not, interest rates will go up and a lot of other nasty things will follow.

etc ...

it just shows that a lot of people need a 101 on economics , again and again. It's easy to forget the basic of sound economic decision making. We all want a fast buck.