69% of Americans Have Less Than $ 1000 Savings: How to Save More for the Future

According to the sixth annual savings study GO Banking Rates, Despite a strong economy, most Americans struggle to save money.

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Since 2014, GOBankingRates has been interviewing Americans to find out how much they have in their savings account. In 2019, adults from all over the United States were asked six questions in order to find out how they accumulate savings and what prevents them from saving more.

The results show that, compared with the previous year, the percentage of people with virtually no savings is growing. In 2019, 69% of respondents said they had less than $ 1000 in their savings account, compared to 58% in 2018.

Main results

Nearly half of respondents—45%—said they had $0 in their savings account. Another 24% saved less than $1000.

Respondents claimed that they live from paycheck to paycheck. In this regard, almost 33% of respondents are unable to save at all, about 20% said that the high cost of living does not allow them to save more.

About 38% believe that they will be able to save more if wages increase, and 18% said that reducing the loan amount will make it possible to accumulate funds.

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33% of respondents said that they use a savings account to store their savings, 29% - do not have savings at all.

Nearly 70% of Americans have less than $ 1000 in a savings account

The survey showed that in 2019, it was more difficult for Americans to save money. In 2017, 57% of respondents said they saved less than $ 1000. This percentage rose slightly to 58% in 2018.

This year it has grown to 69%. This figure includes 45% of respondents who have absolutely nothing on a savings account. The percentage of respondents with a zero balance has not been so high since 2014.

“In reality, saving $1000 will not generate enough help to cover many emergency expenses. That amount would simply be "a starting point toward achieving financial security—it shouldn't be the end goal," said Bruce McClary, a spokesman for the National Foundation for Credit Counseling.

Middle-aged adult women seem to have the most difficulty saving money. The survey found that 51% of women versus 38% of men have $0 in their savings account. And 53% of respondents aged 45 to 54 have no savings - the highest percentage of any age group.

A quarter of Americans focus on retirement savings

In addition to finding out how much (or how little) Americans have on savings accounts, the study sought to find out why people save. In plans for 2020, 26% of respondents indicated a desire to ensure their financial security after retirement.

Older adults were much more likely to save for retirement than younger respondents—74% of respondents age 55 and older said they saved primarily for retirement. Men were slightly more likely than women to save for retirement—28% versus 23%.

Without emergency cash, people end up drawing down their retirement accounts—which is a big mistake because you'll have to pay early withdrawal penalties and taxes on the amount you withdraw from a retirement account like a 401(k) or IRA.

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The survey showed that 19% of respondents make savings on an emergency fund, making it the second most popular savings target after retirement. The survey also showed that Americans would save more on vacation than on a car, home, or school.

Cost of living holds back Americans

One of the main reasons that respondents said they no longer save is because the cost of living where they live is high. This year, it seems, there are more problems, as 20% of respondents said that the cost of living was an obstacle to saving compared to 18% in 2018.

“As the cost of living rises in many cities, people's budgets are getting tighter and tighter, leaving them with less money to save,” McClary said.

However, the biggest obstacle to saving is living paycheck to paycheck. Nearly 33% of respondents said this is stopping them from saving more, up from 31% in 2018.

Adults aged 35 to 44 said the cost of living does not allow them to save more. And women are much more likely than men to encounter this obstacle - 38% versus 27%.

According to McClary, this is a symptom of a more serious problem: "This is often the result of a person having no spending plan, and he does not track what he spends and does not track his income."

According to McClary, it’s worth the time to sit down and make a budget. It can help people break the vicious circle. 9% of respondents said that not knowing how to make a budget prevents them from saving more. A financial literacy survey conducted by the National Credit Counseling Facility in 2019 found that less than half of Americans have a budget and they carefully monitor how much they spend.

Americans need higher salaries to save more

Considering that living paycheck to paycheck was cited as the top barrier to saving, it's not surprising that respondents believed the main thing they needed to save more money was a higher salary. About 38% of respondents said that a higher salary would allow them to save more.

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Reducing credit or reducing debt is the second reason preventing Americans from saving more, with about 18% choosing this option. While respondents said the high cost of living is one of the top barriers to saving, only 9% said moving to an area with a lower cost of living was the number one thing that would help them.

Americans prefer savings accounts, but many don't have savings

The study found that respondents who save are most likely to keep their money in a savings account, with about 33% doing so. However, an almost equal percentage of respondents—29%—indicated that they had no savings.

A savings account can be a good place to store emergency funds because money is easily available. But this is not the place to place pension savings, because interest rates on savings accounts are relatively low. For long-term savings, accounts such as 401 (k) and IRAs are definitely better because of the tax breaks they offer. They also allow you to invest in stocks or mutual funds, which usually offer a higher rate of return than traditional savings accounts.

How Americans Can Save More

Although the survey showed that Americans face various barriers to saving, McClary said that there are simple steps people can take to set aside more and improve their financial security.

“Find the motivation to save. Knowing what to save and motivation are two different things. So if you need help saving, think about the consequences of not saving, McClary said. Think about the problems in the future: if your savings account remains empty, then the picture is quite dire. It can motivate you to do something right now.”

Make saving a priority. You do not have to wait until the end of the month to see how much money you have left to save a certain amount. Instead, you should create a budget and include savings at the top of your core spending list. To determine how much you can allocate, add up the costs that you have to cover and determine what non-essential expenses you can cut to save.

This does not mean that you should give up everything that you like. Look for free and cheap alternatives. Also, look for ways to lower your monthly bills by comparing rates with other service providers or by negotiating with your current providers.

Automate Savings. To save money, ask your human resources department at work to deposit part of each salary directly into a savings account.

Find someone to hold you accountable. Share your savings goals with a friend or family member or seek professional help. According to McClary, the National Credit Counseling Facility has member agencies in all 50 states where you can sit and budget for free.

Stop worrying about failure. According to McClary, the main reason people don’t care about the budget and don’t save is because they are afraid of failure. Instead of being afraid to make a mistake, admit that you can stumble from time to time on the way to achieving your financial goals. Just make a commitment to learn from these mistakes.

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