Consumers have experienced paltry progress in middle class incomes during the period of 2007 through today, and some say that stagnation has persisted for decades.  Income stagnation has been ascribed to disappointing labor productivity and to high unemployment that became nearly full employment, which too often pays just subsistence wages.  Many job openings remain unfilled due to lack of candidates with the requisite skills.  Labor’s skills and productivity are holding back American families’ hope for a better future.

Another warning beacon for future conditions is also flashing.  American families have cut back on their savings rate.  The net national saving rate stands at 2.6% in late 2015, less than half the 6.3% average in the final three decades of the 20th century.  Most of our trading partners have much higher savings rates and we are borrowing our current savings to finance this nation’s debt.  That may feel good today, but our savings underperformance will need to be repaid, possibly when we can least afford it.

The importance of savings comes as no surprise to those who ponder their family’s future needs and resources.  The lack of savings is not just an abstraction — there are real consequences as experience teaches us.  Twenty-seven percent of those aged 65 and over, picked “not starting retirement savings early enough as their top financial regret.  Even for those under age of 65, 17% picked delayed retirement savings as their top regret.  Next in line were inadequate savings for emergencies, taking on too much student debt and inadequate savings for children’s education.

Inadequate savings might mean that a family cannot afford some medical treatments, or afford car repairs, or have sufficient money to pursue a solid education, or be forced to endure Spartan living conditions in retirement.  A lack of money can last far too long.

There are many choices for savings and there are specialized tax programs that offer advantages but limit the use of the savings.  Some savings programs are suitable for use in emergencies, but some are restricted by tax code for use on categories of expenditures or may be limited to certain age brackets.

Risk and return on savings choices can vary radically.  Outside the specialized programs such as 401(k) and Individual Retirement Accounts — where the saver has the substantial freedom for deposits and withdrawals — the lowest risk and return for savings comes from consumer bank accounts.

Savings can also be achieved through reduction of debts.  Repaying things like a mortgage, payday loans and credit cards debt is a good, low risk strategy.  The highest return for consumers probably comes from repayment of payday loans (18%) and credit card debt (15%).  Mortgage repayment may offer a seemingly attractive rate (3.5%), but mortgage interest payments can often be used as an income deduction for tax purposes, reducing the effective yield on mortgage repayment.  Repayment of car loans will likely have little tax consequence.  When major debts are repaid, the family achieves financial elbow room and the ability to dive more money into conventional savings choices.

Savings invested in preferred or common stock, or in government T-bills, or municipal bonds offer a robust set of returns and risks today.  T-Bills offer yields between 1/4% to near 4%.  Individual Puerto Rican government bonds offer a spectacular return – but Puerto Rico is insolvent so don’t expect much for interest or principal.  On today’s stock exchange, average dividend payments are near 2 and stock prices vacillate sometimes wildly.  Perhaps the best way for individuals to participate in the stock and bond markets are through Electronically Traded Funds (ETFs) or through mutual funds.

Regardless of how a family achieves it, a regular practice of saving provides an advantage for the future.  The historic average of 6% savings may be a good guide, but there is no obvious downside to saving more than that.  A family should choose an investment portfolio that is diversified and which earns at least the rate of inflation.  The upsides are obvious and the challenge seems to be adhering to a regular habit of making savings deposits.