As a follow up to my credit card debt article, I decided to dig deeper into the lack of savings the average American has. In my deep dive, it has become obvious to me that despite an improving economy, Americans still have trouble saving — a shocking number of adults have less than $1,000 in a savings account, even when their incomes are more than $150,000.
Although people with different incomes have unique obstacles to saving money, a recent survey of more than 7,000 people from personal-finance website GoBankingRates found that people at all income levels had very little saved in savings accounts.
It really makes you wonder, for those that are making so much, why are they struggling with paying for unforeseen events and not saving? Could it be the consumerism and overextended lifestyle?
Below are some mind-blowing statistics courtesy of GoBankRates.
People with incomes less than $25,000:
- 38% had $0 saved
- 35% had less than $1,000.
People with income of $100,000 to $149,999:
- 18% had $0 saved in a savings account
- 26% had less than $1,000
For earners of $150,000 annually or more:
- 6% had $0 saved
- 23% had less than $1,000 saved
It is evident that Americans are some of the worst savers in the developed world. U.S. adults currently save just under 6% of their disposable incomes, which includes savings in retirement accounts.
Almost half of American adults could not cover an emergency expense of $400 without selling something or borrowing money. About 31% of non-retired adults have no retirement savings or pension at all; among those who were employed but not enrolled in a retirement savings plan, 19% said they weren’t even sure if their workplace offered a savings plan, such as a 401(k) or something similar.
That is frankly shocking and not acceptable. Not to mention, student debt remains a large expense for many families; not only are recent graduates paying their loans, but parents may still be paying their children’s loans, impacting their ability to retire.
Much has been written about apps that can help people keep track of their finances. But technology has also made it easier for people to spend more money. As companies compete for consumers’ loyalty, they’ve made paying for items as easy as sending a Facebook message, talking to Apple’s voice-powered virtual assistant Siri or clicking one button.
Not to mention subscription services, such as music and video streaming, meal delivery kits or monthly clothing delivery, which have become commonplace, also add up and can be difficult to cancel — or difficult to even remember you signed up for in the first place.
And of course, you can show off all those purchases on Facebook and Instagram; almost 40% of adults with a social media account said seeing other people’s purchases and vacations on those networks encourages them to look into buying something similar, according to a survey by the American Institute of Certified Public Accountants.
So not only are we not saving enough, we are also excessively spending beyond each of our individual capacities because someone else we are following on social media went out and bought that fancy new watch, with for all we know money they don’t have. It is a perpetual cycle of debt fueled splurging. Granted some may be able to go out and lavishly spend, but with the way social media has gone, the endless paid marketing and product placement, you never truly know who is being paid to promote what.
How You Can Start Spending Less, and Saving More:
1. Pick A Number – write down a specific amount that you would like to have saved up, either for a rainy day or to invest and grow your wealth. In the beginning, the amount you decide on saving is not as important as the act of saving itself.
2. Automate The Process – Have an automatic contribution set up to either go into a separate savings account, or tax-beneficial investment account
3. Cut Expenses – As you can tell, it makes no difference if you are making a six-figure income if you are blowing it all and back to zero next year. Cut any excess out of your life. Your future self will thank you for it
4. Set Limits – Set a hard limit on how much you will spend from each paycheck (beyond fixed living expenses) and stick to it. For some it could be 5%, and for some it could be 50%. Everyone has their own situation, take charge of yours.
5. Hold Yourself Accountable – Be disciplined and stern on yourself. After all, you are your harshest critic. It’s like working out, once you get in the habit of it, saving can not only become enjoyable but it can also provide you peace of mind and options in life. Imagine not having to worry about unforeseen circumstance coming up, or you not being able to work anymore. Get off the hamster wheel and help yourself.
Remember, there is nothing wrong with spending your hard earned money, but as you can see from what I’ve stated, saving and growing that hard earned money can be enjoyable as well. It is time we as people collectively started taking stock of our finances and building a sustainable financial future for ourselves.