69% of Americans Have Less Than $ 1000 Savings: How to Save More for the Future
According to the sixth annual savings study GOBankingRates, Despite a strong economy, most Americans struggle to save money.
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.
Almost half of the 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 fact, saving $ 1000 will not create enough help to cover many extraordinary expenses. This amount will simply be “the starting point for financial security — it should not be the ultimate goal,” said Bruce McClary, a spokesman for the National Credit Counseling Fund.
Middle-aged adults seem to have the most difficulty saving money. The survey showed that 51% of women versus 38% of men have $ 0 in a savings account. And 53% of respondents aged 45 to 54 do not have savings - the highest percentage among all age groups.
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 people are much more likely to save for retirement than young respondents - 74% of respondents aged 55 and older said that they mostly save for retirement. Men a little more often than women saved up for retirement - 28% against 23%.
Without cash for unforeseen expenses, people end up using their retirement accounts - which is a big mistake because you have to pay a penalty for early withdrawals and taxes on the amount you withdraw from your retirement account, such as 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 living costs rise in many cities, people's budgets are getting denser and denser, leaving them with less money to save money,” said McClary.
However, the biggest obstacle to saving is living from paycheck to paycheck. Almost 33% of respondents said that this prevents them from saving more - compared to 31% in 2018.
Adults between the ages of 35 and 44 claimed that the cost of living did not allow them to save more. And women are much more likely than men to face 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
Taking into account the fact that life “from paycheck to paycheck” was called the main obstacle to saving, it is not surprising that respondents believed that the main thing that they needed to save more money was a higher salary. About 38% of respondents said that a higher salary would save them more.
A decrease in credit or a decrease in debt is the second reason that prevents Americans from saving more - about 18% chose this option. Although respondents said that high cost of living is one of the main obstacles to saving, only 9% said that moving to an area with a lower cost of living is the first thing that will help them.
Americans prefer savings accounts, but many don't have savings
The study showed that respondents who save are more likely to keep their money in a savings account, such as about 33%. 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 motivation to save. Knowing what to save and motivation are two different things. Therefore, if you need support to save money, think about the consequences of not saving, ”McClary said.“ Think about problems in the future: if your savings account remains empty, the picture is pretty scary. 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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