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5:15 pm - Tuesday November 12, 2019

Americans Report Their Savings Habits and Progress

| Budgeting, Economics, Money Saving Tips | Rating: 4.5
by Numan

A recent research by the ASEC sheds light on some very important statistics regarding Americans’ saving habits and progress

Americans have long been accused as saving too little while consuming too much. A recent survey by the ASEC has some intriguing results. Can you find yourself in the numbers?

I’ve extracted what seemed to me as the most interesting statistics from the report and I’ve divided them into groups. There’s a lot to learn from the following numbers. The most powerful conclusion I draw from this particular survey is the strong need for mass personal finance education the lack of which is responsible for what seems to be an innate inability to save.
Spreading the message of personal finance, budgeting and planning is essential to making real progress in American saving habits (naturally higher interest rates might help as well).

Saving Habits

  • Half of all U.S. households report adequate savings progress.
  • Nearly three-quarters of Americans (73%) report that they “spend less than their income and save the difference.”

  • Little more than half of them (53% of all respondents) say they save at least 5% of their income, and only 28% say that they save at least 10% of their income.
  • More than two-thirds (71%) report that they “have sufficient emergency savings to pay for unexpected expenses like car repairs or a doctor visit.”

A little reminder here, experts usually recommend saving at least 10% of your income on a regular basis. As far as the data goes it seems a quarter of all Americans have difficult time saving at all.

A more intriguing fact is that of half of the Americans who report adequate savings only 28% save at least 10% of their income. This conflict in data stresses the lack of personal finance education and a lack of understanding when it comes to the importance of saving.
Retirement Saving

  • Only 57% of those not retired say they are saving enough for a retirement with a “desirable standard of living”.

  • An important reason for inadequate retirement savings is the failure or inability to “save for retirement at work through a 401(k) or other contributory plan,” which only 55% of the non retired report having.

The crux lies in saving for retirement. Sadly, only 60% of Americans save enough for retirement to meet their desirable living standard. I don’t believe it’s a problem with the subjective definition of “desirable”. I truly believe people weren’t properly educated to plan for retirement.

Lack of contributory plans is an outrage. There are examples of other countries where a mandatory contributory plan was installed with minimal contributions. While these are not enough to properly retire they are a good start while always introducing retirement planning to the other 50% of the population.

  • Only 62% of Americans have a “savings plan with specific goals”.
  • Only 49% have a “spending plan that allows you to save enough money to achieve the goals of your saving plan”.
  • Only 42% “save automatically through regular preauthorized transfers from checking to saving or investments”.

  • Only 41% “save a portion of tax refunds, gifts, bonuses, or other financial windfalls.”

Needless to say having a sound plan with specific goals is the first step in saving. You need to have clear and specific goals that will motivate you to save and help you postpone instant gratifications with a clear view of what you’re aiming for in the future.

Windfalls such as tax refunds or bonuses are excellent saving surplus that will get you ever closer to the goals you’ve set. It’s a pity 59% of Americans quickly consume these funds.

  • Only 21% say their consumer debt is “growing” or “remains at the same level.”

  • More than three-quarters with mortgage loans (76%) say they “will pay off all mortgage debt before retirement.”

“Hard data about savings behavior suggest that responses to several questions were buoyed by the personal optimism of respondents,” said Stephen Brobeck, Consumer Federation of America Executive Director.

We need to be very careful in estimating our current financial situation and future financial prospects. Personal optimism and success oriented planning certainly have their place in life but we must make sure we’re not clueless once our plans don’t go as planned.

Income Differences and Saving Habits

The survey verifies what we all assume intuitively. High income households:

1) Save more
2) Are more aware of the importance of saving
3) Have adequately funded emergency funds
4) Have adequately funded retirement savings

The survey defined high income households as households with incomes of at least $75,000. Obviously these households can afford bigger savings but this is not the entire story. I believe the following statistics are no less important:

  • 85% of the high-income group, but only 36% of the low-income group, report having a savings plan.

  • 72% of the high-income group, but only 29% of the low-income group, report having a spending plan.

  • Furthermore, members of the high-income group are much more likely than those in the low-income group to: know their net worth (72% vs. 38%), save automatically through checking transfers (54% vs. 28%), and save financial windfalls (55% vs. 30%).

It’s all about awareness and good financial education. Low income households are less exposed to good financial advice and the basic of financial planning. Knowing how to plan, budget and manage is crucial for financial success.

Hopefully this blog and many others of its kind will raise public awareness to the importance of personal finance and active management and control of our lives.

For the complete report

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