Question: How do I answer my 24-year-old son who questions why anyone should be saving for the future? The most recent anthrax deaths have convinced him that there may not be a future for him. Answer: Because we don’t know what the future holds, the best plan is to be prepared. Following are words from Barbara O’Neill, a Cooperative Extension specialist at Rutgers University:
"Last month, several New Jersey newspapers interviewed me about the effects of the September 11 acts of terrorism upon investments and 401(k) plans. I noted that most people were ‘sitting tight’ and investing for the long term as financial professionals advise. My most frequently asked questions at that time were from senior citizens concerned about the reduced yield on fixed-income investments, such as certificates of deposit, and looking for higher returns.
"Things have changed. In the last two weeks, some people I have talked to are voicing a question that was unthinkable before September 11: What if there is no "long term" to invest for? The anthrax incidents and threat of future terrorist acts have affected our perception of control over our lives.
"A few people I’ve talked to are even questioning the wisdom of saving for the future. In order to save in a 401(k) plan or elsewhere, one has to believe that it is a better use for their money than spending it today. One has to believe they have a future.
"Did people feel this same level of anxiety during World War II when there was great uncertainty about who would drop the first atomic bomb? If they did, it was not reflected in our national savings rates, which were the highest ever during the early 1940s. Of course, there were also product shortages and war bonds back then and no such thing as Visa and MasterCard.
"One class participant told me recently that he wouldn’t mind saving if he knew that the money would benefit someone in his family if he died. He then wondered aloud if everyone he loved could contract anthrax simultaneously and perish. In that case, he reasoned, he might be better off just spending his 401(k) contributions now while he had the chance."
More on this topic will be included in next week’s column.