The Average American Has Less Savings This Year. Here’s Why

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Did you save less in 2022 than you did last year? 

During the COVID-19 pandemic, Americans were saving more money. In fact, savings account balances grew substantially during these difficult times, despite the fact many people faced unemployment and serious worries about their health.

In 2022, however, savings account balances actually fell, according to the Northwestern Mutual Planning and Progress Study. While the average amount of personal savings in 2021 was $73,000, that average fell to just $62,000 in 2022.

There are several reasons why people may be saving less this year, but here are a few of the most likely explanations for this decline in savings.

There’s more opportunities to spend money

During the COVID-19 pandemic, many businesses were shut down and you couldn’t really travel so spending less happened naturally. Now, of course, there are ample opportunities to shell out cash for hobbies, entertainment, and vacations again.

Of course, you absolutely don’t want to go back to the dark days of not being able to go most places. But if you’ve found yourself spending a ton more cash than you did during the height of the pandemic, it can be worth tracking your spending for a while to see if the things you’re buying are worth it or if you’d be better off trying to set more of that money aside for long-term goals.

Inflation means prices are higher

Prices are a lot higher this year than they were in 2020 or 2021 because inflation has surged. While it’s natural for costs to increase over time, there’s been a very rapid and substantial increase in the cost of key necessities including groceries, gas, and heating/cooling costs.

A number of factors contributed to high inflation, including increased demand once the pandemic began to wane, supply chain issues limiting supply, and a surplus of funds in the economy due to stimulus checks. Unfortunately, most of these factors are beyond your control and you can’t do much about the fact prices are higher.

What you can do, however, is consider less-expensive substitutes. For example, switching to plant-based meals a few times a week instead of always buying expensive cuts of meat could help you avoid seeing your own savings decline.

Less stimulus money was available

Finally, the last big issue that could have made it harder for people to save as much in 2022 is the fact that stimulus money was either more limited or unavailable entirely.

During the past few years, American families received a lot of help from Uncle Sam in order to cope with the economic ramifications of the COVID-19 pandemic. This included, in some cases, direct payments for each family member including minor children. So, some people — and especially parents — ended up with thousands of dollars coming in from the government.

The federal government hasn’t provided any stimulus funds this year, though. And only a limited number of states have moved to offer additional financial relief. Without this bonus help from the government, there’s often less money available to save.

Despite these three justifications why personal savings balances have fallen, it’s best to try to turn things around if you’ve saved less this year. There are still options out there to reduce spending even as the pandemic starts to wane, and many are worth looking into so you can end up with a hefty bank balance that offers the security you deserve.

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