In a consumption-focused society, how can people be encouraged to save?

As chief strategist/consumer education for Charles Schwab & Co. Inc., Schwab-Pomerantz is a leading advocate for individual investors. She speaks and writes extensively about personal finance issues and is a driving force in the movement to improve financial literacy in America. As president of the Charles Schwab Foundation, she also oversees the company's philanthropic strategy and resources.

With her father, company founder, chairman and CEO Charles R. Schwab, Schwab-Pomerantz co-authored "It Pays to Talk: How to Have the Essential Conversations With Your Family About Money and Investing," which Publishers Weekly called "a well-rounded primer that provides one-stop shopping for the many phases of financial understanding and planning."

Schwab-Pomerantz is a sought-after speaker whose public appearances have included appearances on "The Today Show," CNBC and NPR. In 2001, Working Woman magazine recognized her as one of four “Market Movers” in America who are “rewriting the rules of finance,” and she was also recognized as one of the “25 power Elite” in the financial services industry by Investment News. For four consecutive years, The San Francisco Business Times has named her one of the San Francisco Bay Area’s 100 Most Influential Women in Business.

A graduate of the University of California, Berkeley, with a bachelor’s degree in Political Science, Schwab-Pomerantz later earned a master’s degree in business administration from George Washington University. She holds NASD Series 7, 63 and 8 registrations. 

  • Transcript

TRANSCRIPT

Question: In a consumption-focused society, how can people be encouraged to save?

 

Carrie Schwab: The most fascinating part about saving that really motivates most people and particularly young people, is it whole notion of compound growth.

We all learned as in our math classes, but what happens is as we save a little money and then it earns interest or return, then our interest in the amount we save starts to grow itself and it just keeps snow bowling.

I will give you a little example, which is unrealistic, but it really shows compound growth. If you had a penny and it doubled everyday for 30 days, that penny would grow to over 10 million dollars. Now certainly if our money doesn’t grow that quickly. But if you show a young person just even - I am having a 8% to 10% growth rate, the amount of money, which you have at later age is really life changing and very motivating.

I think compound growth is it is really the key to that. Wso the other key motivator is having options in your life and you have to do the things that you otherwise never ever could do.

 

Question: How is a dollar today worth more than a dollar tomorrow?

 

Carrie Schwab: Well that again that is this whole concept of compound growth, that is earning interest or having growth on your dollar and so what happens is the growth itself starts to grow and earn income on it as well. So it is just again the snowball affect, where it grows and grows really fast, similar to have that penny grew.

So saving today allows to grow from one tomorrow.

 

Topic: The sooner you begin to save the better off you will be.

 

Carrie Schwab: What we try to do is get the word out to as many young people as possible. At Schwab we say if you are in your teen, or you’re 20, save 10% of your income for the rest of your life and you will be financially secured. But if you wait until your 30s, you are going to save 15% to 20% of your income. And then your 40s we say “ouch.” Then; 25% of your income; that pretty difficult to do.

So, the sooner you can start, the easier is on your pocket book.

 

Recorded on: March 27, 2008


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