Transcription:
Penny Crosman: (
Welcome to the American Banker podcast, I'm Penny Crosman. Today, we have a very special guest. She has helped millions of Americans make more sensible choices around spending, borrowing, and saving. She has sold more than 30 million books, and she had her own television show for 12 years. Also helping people make good financial decisions. I'd like to welcome personal finance expert and host of the women and money podcast. Susie Orman, Susie, thank you so much for coming.
Suze Orman: (
Thanks Penny. The main reason that I decided to do this is that I love your name, Penny. It's all about money, girlfriend.
Penny Crosman: (
Well, I'm very glad that that helped induce you to join us. I appreciate it. So for years, it's been clear that Americans do not save enough. A recent BankRate survey found that 23% of American households have no emergency savings, 28% have some savings, but not enough to cover three months' worth of expenses, 22% have enough saved to cover three to five months' worth of expenses and 27% do have enough savings to cover six months or more of expenses. But altogether, more than half of American households do not have three months' worth of expenses in their savings account, which seems a little bit dire. Based on your conversations with people all over the country, why do you think so many Americans struggle to save? Are we spendthrifts? Do people just forget to save?
Suze Orman: (
They actually don't forget to save. And I don't want to say that they're spendthrifts. It's that you really have to look at as time has gone on, especially now with inflation and the cost of everything, I understand that gasoline is starting to come down, but food is still going up. And when you don't have a lot of money or you don't make a lot of money and things start to get more and more expensive, such as food, such as housing, such as medical expenses, such as your kids, you never really make yourself a number one priority. You make the things that you need at the moment your priority. The other thing is, Penny, we don't know how to automate savings and there's always something that's going to get in the way of savings, whatever it may be. So it seems that we have become a culture where we live in the moment. If we have the money at hand, we spend it and we never make saving a priority because why, we also have credit cards. And we're so easily able to just, if we get in trouble, put something on a credit card, pay the minimum balance due, and we're fine until we've maxed out on our credit cards or a pandemic hits or inflation is through the roof or you've lost your job or you've gotten sick or whatever it may be. And you don't have any place to get money anymore. And you go, if only if only I had a savings account, but I have found that if you automate it, if you literally just make it so that out of every paycheck, you have 10% put away in a savings account, or you do something like that, once you start to save and you see it build up, you like it. But if you never really start and do that, you almost never ever will.
Penny Crosman: (
Those are great points. And what do you think is the ideal amount to save? And I know you can't put everybody in the same box, but for the average,
Suze Orman: (
Oh yes, I do put everybody in the same box. Are you kidding me? It's if something goes wrong in today's day and age, you need a good eight to 12 months of an emergency savings account. And you want to know that you have that money there in case you can't work. Look how long people were out of work for the pandemic. Look at how long people were out of work in 2008, 2009, they were out of work for eight months to one year. And don't think that can't happen again. Of course it can. So if you have two or three months of savings, well, that's obviously better than one month, but if you are out of work and you really can't get another job, or you're too ill to get another job for a period of time, you need to be able to carry yourself for at least eight months to one year to pay for everything. Because then that gives you time to not have to freak out about losing your apartment, losing your home, losing your car, losing all of these things.
Penny Crosman: (
It seems like most people do not have that today. But when you look at the financial industry as a whole, and again, this is a really broad brush, but do you think the industry does enough today to try to help people save? I mean, here and there, you see, roundup, keep the change programs or you see
Suze Orman: (
Yeah. Who created that to start with? I did on the Oprah Winfrey Show years and years ago, almost 20 years ago where it was, spend dollar bills, keep your change and that change can mount up to a lot. And then everybody else took off on that. But here's the problem. You're using your credit card and you're saying, round up and you can keep it. But the truth is you should be rounding up and putting it into your own savings account. About a year, year and a half ago, actually, it was a lot longer than that. I started in 2007 where I came out with a book called Women & Money, and I decided to do an experiment with another financial institution. And it was very simple. You put $50 a month away every single month for 12 consecutive months.
Suze Orman: (
And we'll give you $100 at the end of that period of time. We'll also give you the going interest rate. I didn't make a penny for, for it, it was just, would people do it? And we did it as a little icon in one of my books, Women & Money and the financial institution thought at most 10,000 people would do it. And so maybe it would cost them $10 million, maybe a little less than that, who knows what it would cost them, maybe a million dollars. 150,000 women did it. And not only did they save $50 a month on average, they saved $150 a month. That's when I learned, Penny, that you could pay people to save and turn them into savers versus spenders. And about a year and a half ago, I did the exact same thing with Alliant Credit Union. And if you went to myalliant.com, again, I'm not making a penny from this, you put in a hundred dollars a month every month for 12 consecutive months. And obviously there are rules and regulations for it. But at the end of those 12 months, they'd give you a hundred dollars. Over $400 million have piled into the Alliant Credit Union because of that. Think about that. In a year and a half.
Penny Crosman: (
That's great.
Suze Orman: (
So yeah, if you incentivize people, they'll do something for it.
Penny Crosman: (
Yeah. That makes total sense. So I think about two years ago, you co-founded a fintech startup called SecureSave. Where did that idea come from and what have you been doing there?
Suze Orman: (
Yeah, the idea actually came as an offshoot, believe it or not, from the two experiments that I had been doing, one with Alliant Credit Union and the other with a financial institution, it was TD Ameritrade by the way. And it was like, how fascinating, if we could create a company where we could make it easy for employees to save money directly from their paychecks and their employers would match their contributions. Because what we realized during the pandemic and I've realized this forever, even before the pandemic, is that when people get into financial trouble, and they always get into financial trouble, if they don't have an emergency savings account, they go to their 401k, they go to their IRA, they go to their Roth IRA to take out money. And that is one of the biggest mistakes they will ever make because retirement accounts are protected against bankruptcies in most cases.
Suze Orman: (
So they take out money, they pay their bills, then they end up going bankrupt and they then don't have any money in retirement accounts. So we went, what if we could create an emergency savings account that an employee could get at any time, they didn't have to ask their HR person. They then maybe could be deterred from taking money out of their retirement accounts, but it would be an out of plan, emergency savings account, where if they put in, let's just say $25 of every paycheck, their employer would match $3 a paycheck, giving them incentive. Now I know that doesn't sound like a lot of money, but if you think about it, $3 on $25 is like 12% on your money. And that's an incentive where paying people to save, the employer is joining in with making the employee more powerful. So we decided to create a program that did that, and it took a long time to do this.
Suze Orman: (
So Devin Miller and Bassam Saliba, my other two partners that really are the brains behind the technology and the branding of everything, created a program where there is an app. With a push of a button, the employees can get their money. They can check it all the time. The human resource people don't have to do anything to deploy the program. We do everything for them. And you know what, Penny, we found that we have a 60% adoption rate in many companies within the first week. And we also found, just so you know, that banks, other financial institutions like Wells Fargo, Truist and Stearns Bank have joined forces with us. And they're now deploying this to their employees. They get to hold the money in their bank and they're loving it. And so, you know, especially Kelly [Skalicky, president and CEO] at Stearns Bank, what an extraordinary partner she has turned out to be. So if you're out there and you have bankers or credit unions, or whoever's listening to this, you can join in on this with us and use your own financial institution to store the funds and partner with us to change the savings rate of America.
Penny Crosman: (
Is it hard to get employers to be willing to make those matching contributions? That could add up.
Suze Orman: (
No, not as soon as they realize number one, how easy it is for their human resources to deploy this. They also have done studies and we have white papers on it. You could go to securesave.com and check it out yourself. Out of all the surveys done, the number one benefit that the employee wants and needs more than any other benefit is an employee savings account. They want it more than paying off their student loans. They know they need money. They know they don't have a place to go and save it and get it matched because it's not automated for them. They know they're in trouble. They don't want to have to break into their 401k plans. So they don't even bother putting money in their 401k plan because they don't think they can get it out. So the employers have realized this is an efficient way to make the employee more powerful and feel more secure. And the more secure an employee is the better off of a worker they are. And the more money they'll make for your company. And once they start to feel more secure, then they feel more secure to be able to contribute to retirement accounts as well.
Penny Crosman: (
Can they take money out of the savings plan if they had an emergency?
Suze Orman: (
Anytime they want.
Penny Crosman: (
Okay. There's no penalty?
Suze Orman: (
There's no penalty, no fees to the employee. Even if they leave where they're working, they can take it with them if they want to, they can do anything they want. The difference is truly between them doing it themselves and us doing it for them. They aren't doing it themselves. You just gave stats, Penny, of why people don't have any savings. The question is why it's not automated for them. And they're not paid to save. Here, the employee is being paid to save. They don't have to be vested. They get to access this money anytime they want. They can go on the app and look at their money and how it's growing every single day. And they love that. And most of the employees, I think it's over 90-some-odd percent of the employees that have signed up for this, they've never taken a penny out. Because we really drive it home that this is money for an emergency. This is not money just for you to have a savings account so that if you wanna go on vacation, you can. No, this is money for an emergency. Your car breaks down. You lose your job. You aren't able to feed your kids. You can't pay your rent. Emergencies that will change your life for the worse. This changes your life for the better.
Penny Crosman: (
It makes sense. We write a lot about predatory loans and subprime lenders that charge 400% interest rates and such and people are often forced to go there because they have some kind of medical emergency or they need new tires on their car or something like that.
Suze Orman: (
You know what I learned a long time ago on the Suze Orman Show on CNBC was that people had really high FICO scores, credit scores, yet they had debt. They had all kinds of things going on. People cared so much about their FICO score, that they would take loans from their 401k plan to pay the minimum payment due on their credit cards. They would take out payday loans in order to pay the minimum payment due on their credit cards. So they would have a good FICO score in case they wanted more credit. Do you understand how crazy that is? It's crazy, everybody. So just because somebody has a good FICO score, it doesn't tabulate where is the money coming from to make the minimum payments due on your credit cards? There has never been a more important period in time than right now that companies like SecureSave where emergency savings accounts are the number one priorities for employees where employers and financial institutions are helping people today to save than right here and right now.
Penny Crosman: (
That makes sense. Now this is a bit of a tangent, but I've spoken with a few companies recently that are offering Bitcoin savings plans to employers. You put a certain amount of each paycheck in a pool of savings that's invested in bitcoin. And I just wondered what you think of that and investing in cryptocurrency in general.
Suze Orman: (
Well, I would only be investing in cryptocurrency at this point in time, if it was money that you could afford to lose, if it was money, in fact, that you wouldn't need for a seriously long period of time, because we never know when is the government going to step in and regulate it. Sure you could invest in Bitcoin, and maybe you did, when it was at $60,000 a Bitcoin, and now it's at $23,000, a Bitcoin very possibly could go down to $13,000 a Bitcoin. And as soon as people see their savings start to fluctuate, you want to know, in my opinion, what they're gonna do? They're going to stop saving. They're going to get afraid. Because the goal of money is for you to be secure. And when you see your savings account go from $400 down to $100, in your head, you've lost money.
Suze Orman: (
You never want to feel like you've lost money when it comes to savings. So employers, maybe you think that you're doing your employees a big favor. I think you are not. And I think it's actually a travesty that you're doing it because you're actually bringing a speculative form of saving into the lives of employees that already want to make money. They'll do anything to gamble it so that they can have some and you're giving them hope. But in my opinion, it's fake hope. Listen, if you have an employee that has no credit card debt, is fully funding their retirement accounts, owns a home, owns their car outright, has a 12-month emergency fund and you want to give them that, but limit them to maybe a thousand dollars a year, I don't have a problem with that. But that's not what you're doing. That's not what you're doing. And I think you're hurting them versus helping them.
Penny Crosman: (
Well, that makes sense. I appreciate that point of view. Do you have any last word of advice for our listeners on where to invest, where to put their money? You know, especially if there's a recession looming.
Suze Orman: (
Well, you know, here's the thing. I know everybody's happy that the markets are going up right now. And thousands of people are writing me in my Women & Money podcast about the market now is going straight up, Suze, this is it. We're putting everything we have in it. There's no guarantees in life right now, Penny, in terms of what's happening in the economy. And so if you want to take advantage of this market and you have at least 5, 10, 15 years or longer till you need the money that you're putting into the market and hopefully you're first doing it through your retirement accounts at work. And hopefully you're doing it in a Roth IRA if you qualify for one or a 401k Roth as well, and you can do both at the same time and your dollar cost averaging every month into a diversified portfolio, like an index fund, I hope that's what you're doing.
Suze Orman: (
But besides a retirement account, you want to make sure you have, like I said, your eight to 12 month emergency fund. If you're also looking for a really, really safe place to put money that you do not need for at least one year, you have to look into Series I savings bonds. You have to be crazy right now if you aren't putting money into Series I BOs, minimum is $25 up to a maximum of $10,000 per year. Although there's many different ways that you can put far more than that in. And if you don't know about IBOs, you have to because right now they're paying 9.62%. And guaranteed by the authority of the United States government. So on April 17th on the Women & Money podcast, I did a master class on IBOs and then I did a follow up one on that a few months later that, you should just listen to my podcast.
Suze Orman: (
Because if you had, you would've been investing in IBOs over a year ago and you would've been making 7%. You have to know you cannot access IBOs for at least one year after one year through year five. If you take money out, it's a three-month interest penalty. But after five years you can take any amount of money you want out whatsoever. And it's all tax deferred. You don't pay taxes on it until you redeem them. You really, really need to learn about them. So April 17th and then other ones that I've done, just look it up for Women & Money.
Penny Crosman: (
Well, that sounds like great advice. I will be checking out that podcast tonight. Suze Orman, than,k you so much for joining us and giving us this advice and telling us about SecureSave. Thank you, all of you for listening to the American Banker podcast. I produced this episode with audio production by Kelly Malone. Special thanks this week to our guest Suze Orman. Rate us, review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker I'm Penny Crosman and thank you for listening.