Last week at the State Fair, I was on Minnesota Public Radio's noon-hour program with host Kate Smith. We took questions on the economy and personal finances from the audience and over the phone. Topics included savings, naturally. The latest reading of the personal savings rate is 4.4 percent -- well above its low of 1 percent in April 2005. With the nation's unemployment rate above 8 percent for 42 consecutive months, I think it's remarkable how well people are doing at saving.
We talked about the trade-off between safety and yield, risk and return, when it comes to deciding where to save your money. For example, putting money into federally insured savings accounts and U.S. Treasury bills is safe, but the price of safety is a fractional return. Stocks are far more volatile than cash, but equities hold out the possibility of earning a higher return -- or not.
What I wish I had mentioned is the importance of time when thinking through your savings strategies. Time, or really a lack of time, is an underappreciated element in the savings calculation.
The social philosopher Alexis de Tocqueville was struck during his travels in the 1830s at the "restiveness" of ordinary Americans. In the early decades of the 20th century, Laura Ingalls Wilder complained, "We have so many machines and so many helps, in one way or another, to save time; and yet I wonder what we do with the time we save. Nobody seems to have any!"
Most modern families are right to feel more pressed for time than, say, their parents' generation. A major factor is employers' relentless drive for higher productivity. Smartphones, tablets and other high-tech gear have eroded the traditional boundaries between the office cubicle and the kitchen table. Employers have embraced retirement plans and health insurance policies that rely on each of us becoming educated investors and savvy consumers of medical care.
We have partners, families and friends, and all make (and should make) demands on our time. We're encouraged to eat a healthy diet and we have to figure out what that means. We have to find time for regular exercise. We try to keep up with the latest technologies. We volunteer in the community. We're expected to be engaged citizens and make informed decisions in the upcoming election. I could go on but you get the idea.
You can't escape the time trade-off. That's why I consider how much time you want to spend managing and monitoring your savings to be a critical question.
It's true that I'm not making any money on my savings account, but it's also an easy way to create a hedge against economic and financial trouble without taking up much of my time. Similarly, my stock investments are in a broad-based equity index fund. With an index fund, there is no professional money manager buying and selling stocks, trying to beat the market. I'll do as well -- and as poorly -- as the market index.
On the other hand, you might enjoy taking a more involved approach to your money. Perhaps you'll hire a professional adviser, a critical relationship to manage. You might like picking stocks and investing in actively managed mutual funds. These financial investments take time to do well.
So, when deciding on a savings strategy for your household, make a realistic calculation of your time demands.
Chris Farrell is economics editor for "Marketplace Money." His e-mail is firstname.lastname@example.org.