Sometimes, it Doesn't Pay to Save

"Act now, and you may be able to pay less than you owe!" proclaims an ad for debt consolidation services. I'm all for paying off debts, but I was offended. Why should some people be allowed to pay less than they owe when others (like me) are habitually denying themselves things they want in order to stay out of debt? The ad might as well have said, "Be rewarded for your financial irresponsibility!"

Situations like these - where savers are penalized - are rare, but they are irksome to those of us who work hard to keep our accounts from going negative. Any type of amnesty from debt or taxes can serve as a reward for those who did not plan ahead and a penalty to those who did. So can several other cultural practices and business policies. In some cases, the act of saving itself can cause a real loss of buying power.

For example, I am grateful to my parents for saving for my college tuition, but their savings put me at a disadvantage when it came time to apply for scholarships. My grades and extra-curriculars would have qualified me for financial rewards, had my parents not socked away money for my education. The applications asked not only about their income but also about how much they had in savings. I still remember the words of my teetotaling father: "If I had spent all my money on alcohol instead of putting it away for college, you would be able to get these scholarships." In other words, it hadn't paid to save so much.