And the winner is… Los Alamos?
Posted on September 13, 2006 3 Comments
A new way to think about America’s best cities:
Top American Cities For Savings
Kurt Badenhausen
Forbes.com
The United States does not do savings. Last year, the personal savings rate as a percentage of disposable income in this country was negative 0.5 percent, by far the lowest of any industrialized nation.
In France, the savings rate was 11.6 percent. Germany’s rate was a robust 10.6 percent. Japan clocked in at 6.7 percent.
What’s the problem? Americans like to spend too much, and it’s often money we don’t have. Revolving credit card debt hit $807 billion in April, according to the Federal Reserve. That’s the equivalent of $7,200 per household.
“The savings situation in this country is dire, as people are not adding to their savings in the way they should be,” says Sophie Beckmann, Financial Planning Specialist at St. Louis-based investment brokerage A.G. Edwards. “People are setting their priorities where savings is not high on the list.”
With this in mind, A.G. Edwards set out to determine which American cities are doing the best job of building wealth. The result was A.G. Edwards’ second annual Nest Egg Index, which ranks the top 500 markets based on their residents’ investing and personal savings behavior.
Topping this year’s list was Los Alamos, N.M., home to the renowned Los Alamos National Laboratory. The lab started in 1943 with one purpose: to design and build an atomic bomb. Since then, it’s focused on national security and the safety and reliability of the United States’ nuclear arsenal.
Los Alamos has a high concentration of managerial and professional jobs. Its place atop the Nest Egg Index can be attributed to the highest household incomes in the country, as well as the high net worth of its residents.
The Nest Egg Index looks at the 934 core-based statistical areas defined by the U.S. Census Bureau. It examines 12 categories that influence personal savings categories, including savings and investing propensity; 401(k) and pension plan penetration; home ownership and home values; mortgage and personal debt levels; net worth; household incomes; cost of living; and employment rates.
“Rather than just incremental savings, we are looking at people’s assets and debt levels,” says Beckmann.
Clocking in at second place behind Los Alamos is Fairfield County in southern Connecticut. This wealthy enclave outside of New York City is home to the corporate headquarters of General Electric, International Paper and Xerox.
As the home to many hedge funds in Greenwich, Fairfield County fittingly tops the Nest Egg Index when it comes to investing propensity. The area also scores highly on housing values and household incomes.
Finishing in third place is the San Jose, Calif., area, home to tech titans Cisco Systems, eBay and Intel, among others. Not surprisingly, this area had the highest housing values in the country in 2005, with an average price of $745,000, according to the National Association of Realtors. The area also ranked highly on 401(k) plan participation, investing propensity and low debt levels.
While several big cities — such as Minneapolis, San Francisco and Washington, D.C. — performed well on the Nest Egg Index, many of the country’s biggest areas finished far down the list. Los Angeles came in at 443; Houston fared even worse, at 455.
Of the ten largest metro areas as defined by the Office of Management and Budget, only the Washington, D.C.-Northern Virginia metro finished in the top 50 of the Nest Egg Index.
A.G. Edwards’ Beckmann attributes this to the high cost of living in many of these areas, as well as the fact that many of those who work in these areas commute from other metros (e.g. Fairfield County residents who commute into New York City).
What do the best-performing cities have in common? Low debt. All but six regions in the top 50 have personal credit-card debt levels below the national average.
Beckmann offers a word of advice for savers: “Get a plan in place, and be disciplined and avoid debt if at all possible.”
After all, paying 20 percent interest on your debt is a one-way ticket to eroding your nest egg.
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3 Responses to “And the winner is… Los Alamos?”
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September 13th, 2006 @ 6:22 pm
807 BILLION?!? WOW!!! Well I can say I have helped contribute to that!
September 13th, 2006 @ 6:45 pm
Of course the people who make the most save the most. Maybe they need to rule out certain people, areas or income levels to get an accurate statistic of the majority of the population.
September 13th, 2006 @ 9:03 pm
What is the national average of credit card debt, meaning per household or individual?
Great blog Nicole!