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Did you know that only 7 in 10 Americans have less than $1000 in Savings? Sean Williams, The Motley Fool, via 11alive.com shares why and a six steps to fix it.
Nearly 7 in 10 Americans have less than $1,000 in savings – Here are six tips. USA TODAY
Syndicated from 11alive.com by Sean Williams, The Motley Fool, WXIA
The U.S. is often referred to as the land of economic opportunity. Apparently, it’s also the land of consumption and “spend everything you’ve got.”
We don’t have to look far for confirmation that Americans are generally poor savers. Every month the St. Louis Federal Reserve releases data on personal household savings rates. In July 2016, the personal savings rate was just 5.7%. Comparatively, personal savings rates in the U.S. 50 years ago were double where they are today, and nearly all developed countries have a higher personal savings rate than the United States. In other words, Americans are saving less of their income than they should be — the recommendation is to save between 10% and 15% of your annual income — and they’re being forced to do more with less in terms of investing.
America’s poor savings habits
However, new data emerged this week from personal-finance news website GoBankingRates that shows just how dire Americans’ savings habits really are.
Last year, GoBankingRates surveyed more than 5,000 Americans only to uncover that 62% of them had less than $1,000 in savings. Last month GoBankingRates again posed the question to Americans of how much they had in their savings account, only this time it asked 7,052 people. The result? Nearly seven in 10 Americans (69%) had less than $1,000 in their savings account.
Breaking the survey data down a bit further, we find that 34% of Americans don’t have a dime in their savings account, while another 35% have less than $1,000. Of the remaining survey-takers, 11% have between $1,000 and $4,999, 4% have between $5,000 and $9,999, and 15% have more than $10,000.
Furthermore, even though lower-income adults struggle with saving money more than middle- and upper-income folks, no income group did particularly well. Some 29% of adults earning more than $150,000 a year, and 44% making between $100,000 and $149,999, had less than $1,000 in savings. Comparatively, 73% of the lowest income adults (those earnings $24,999 or less annually) had less than $1,000 in their savings account.
There was even minimal difference between multiple generations of Americans. From seniors aged 65 and up to young millennials aged 18 to 24, between 62% and 72% of Americans had less than $1,000 in a savings account.
The sources of America’s poor saving habits
This data is particularly worrisome since the recommendation is for Americans to have six months in expenses saved in case of an emergency, such as a large medical expense, car repair bill, or losing your job. Without this emergency fund to fall back on, millions of Americans could be risking financial disaster.
According to GoBankingRates’ report, two factors are to blame for Americans’ inability to save. First, some Americans are simply living beyond their means. With roughly 70% of U.S. GDP tied to consumption, and our society revolving around going out for entertainment, this isn’t too surprising.
The other issue is that credit cards and alternative payment platforms, such as Apple Pay, have made it easier than ever to spend money. It’s a lot easier to spend money when you’re not dealing with tangible cash. This out of sight, out of mind mentality could leave Americans out of money when they need it.
Six tips to a better budget
The obvious solution to fixing America’s savings woes is for Americans to adopt (and stick to) a detailed monthly budget. A 2013 survey from national pollster Gallup found that just 32% of American households were sticking to a monthly budget. Without a budget it can be practically impossible for consumers to understand their cash flow – and if they don’t understand their cash flow, they won’t be able to maximize their savings.
With this in mind, here are six tips that should help get you on the right track to growing your savings account and building a healthy emergency fund.
1. Use online budgeting tools
The first move to make is to use online budgeting software. The days of having to formulate a budget by hand are long gone, and they’ve been replaced by a plethora of online budgeting tools, some of which are free. In many instances online budgeting software will not only handle the grunt work of adding and subtracting, but it can also help you formulate a savings plan based on the dollar amount or percentage of earned income you want to save. In roughly 30 minutes you could have a working budget in place.
2. Surround yourself with like-minded people
The second key to a great budget is that you’ll want to surround yourself with like-minded people that share your goal of financial betterment. Your chances of sticking to your budget will be substantially higher if everyone in your household, including a significant other, kids, grandparents, or friends, are also sticking to a budget. If you live alone, consider meeting up with a group of people once or twice monthly who share the same mission as you (to save money).
3. Consider the use of separate accounts or cash
It’s no secret that Americans have a propensity to spend first and ask questions later, which is made easy with the use of credit cards and alternative payment options. One of the best ways to break the “spend first” habit is to consider the use of separate spending accounts. For example, if you’re budgeting $300 a month to entertainment, consider putting … (continue reading Nearly 7 in 10 Americans have less than $1000 in savings via 11alive.com)
