Chapter 6 Summary

Chapter Six

The chapter starts out relating the familiarity of thrift in society by alluding to the 1946 film It’s a Wonderful Life. Institutions such as building and loan, and savings and loan were not alien to people of those times and they recognized them as places for the “small saver.” Luckily, in contrast with the businesses today, these places limited the amount of debt the consumer had. In order to take out a loan, people had to accumulate savings, go to a bank, and demonstrate credit worthiness. Any form of thriftlessness was outlawed entirely. Nowadays, credit can be both good and bad. It can be used to buy a house, start a business, and boost job prospects. However, without proper knowledge or responsibility of credit, credit can be a disaster. In 2004, the typical family spent more than 18 percent of its income on debt payments. Debt in small amounts is fine for families who have children and who purchase “big-ticket” items like houses or cars. However, some rely on credit to make ends meet. Many are not as lucky and experience serious debt problems such as missed payments and late fees. In 2006, late fees accounted for $17.1 billion dollars from Americans. Blame for these kinds of debt in general are pointed to not only personal individual selfishness and greed but also the greed of corporate America. Even though credit cards are convenient and easy to use, their debt makes up the majority of the debt in America today. It is shown that 56 percent of final year college students own four or more credit cards. In 2007 alone, credit card debt reached a whopping $937.5 billion dollars. Another source of debt is the payday lender. They promote the idea of “fast cash” to consumers who generally live from paycheck to paycheck. They also target the elderly or disabled. Unfortunately, they are structured to make it almost impossible to repay to requisite amount in the allotted two weeks. About 56 percent of payday lending revenue is generated by those who take out thirteen or more loans per year. Payday lending is able to thrive for many reasons including the fact that there are few states with laws regarding how high the interest rates have to be. An alarming statistic states that the annual percentage rates increased from 36 percent in 1965 to 521 percent in 2007. Another antithrift establishment is the lotteries. Based on commission, lotteries target lower income households and statistics show that lower income households spend more on tickets per year than those with high income. The Tax Foundation estimates that if a household invested that money in stocks every year for forty years, they could expect to accumulate $87,191. New goals that we should live by include creating a thrift savings plan for all Americans to live by, build new thrift institutions, and re-purpose the lottery. We should get America back on track and live the motto's that our forefathers lived by to build their wealth tremendously.