In not-shocking news, Americans aren’t saving — or at the very least aren’t saving enough.
A recent Bankrate study found that 21% of Americans aren’t saving any money. Frankly, what I find more surprising is the idea that, according to the study, 64% of Americans are saving something.
Unfortunately, 48% of them are saving 10% or less of their income, but that’s still more people saving than I’d have expected.
Older but wiser (or at least save-ier)
The study found that people 55 or older were far more likely to be saving more than 15% of their income compared to Gen Xers and millennials.
Of course that’s true. Because, medical issues aside, older people are probably going to have fewer expenses.
First of all, they’re probably done paying for childcare. That’s huge. I didn’t learn how huge until I saw the recent #WhatIPayForChildcare on Twitter. It’s not uncommon for people to spend $12,000 or more (maybe significantly more) a year on childcare.
Granted, Stephanie is in a high cost of living area, but her daycare costs still give us an idea of just how crazy people’s childcare expenses can be.
So, yes, older generations are almost certainly going to dodge a bullet by being free of daycare bills. That’s quite a chunk of change that can be saved, right? Even $12,000 a year is 25% of the average American’s salary.
People 55 and older are also more likely to have a paid-off house. Nixing the mortgage is easily another $1,000 to $1,500 (or, yes, significantly more) that can go to savings.
And it seems like older Americans are less likely to have a car payment. That’s huge because currently the average car payment clocks in at $523.
That is a stupendous amount of money to be paying each month! Heck, over the course of a year it’s more than enough to fully fund a Roth IRA. In fact, if people with the average American salary could save a car payment’s worth of money every month, they’d already be saving 13% of their income, putting their results up above 69% of their fellow Americans’.
Older people have also been in the workforce longer, so those still in the workforce may earn more than the younger generations. In short, older people are more likely to have fewer expenses and could also be making more money. It shouldn’t surprise anyone that they’re saving more.
Low income = low savings
Similarly not eyebrow-raising, people making under $30,000 a year reported struggling more to save. Specifically, 45% of those households reported not saving anything at all.
So… You’re saying that if you have less money it’s difficult to save? Stop the presses!
Sarcasm aside, this study certainly points to a huge problem in our society. We’re not saving enough to keep ourselves safe from unexpected expenses ruining our finances.
That creates a situation where 40% of citizens can’t cover a $400 emergency, meaning at least 40% of the population can’t possibly feel financially safe at any given time.
The why and wherefore
And why aren’t we saving? Well, across all age groups, the top answer was “having too many expenses” to save.
Of course, the fact that people have too many expenses is once again not shocking. But 38% of people citing that compared to just 13% pointing to debt? That’s surprising.
After all, consumer debt just hit an all-time high of $13.3 trillion, with mortgage debt being $9.4 trillion and student loan debt at $1.37 trillion. How, then, is debt only the fourth-most cited reason for not saving enough?
Are people counting debt payments as part of their expenses? Are they including student loan and car payments when they think of their expenses? Or have expenses simply gone that crazy?
It’s not hard to see how the latter could be true. Big mortgages (I think most people are going to count a mortgage as an expense rather than debt) and daycare costs alone could easily eat up at least $2,000 to $3,000 a month.
Then there are all of the extras that have crept into our lives. From smartphones and their costly data plans (easily $80 to $120 a month, depending on the size of the family) to an average cable bill of $107 to the latest electronics to all of the subscription services it’s so easy to sign up for, it’s not hard to see how the average family’s expenses have become a hindrance to saving.
But that doesn’t help us fix this issue. The only thing to do is lower expenses — something we could probably all stand to do. Which means it’s time to make the hard calls.
Change your credit card
Actually, one call that’s not hard to make: If you have credit card debt, it’s time to transfer it to a 0% APR credit card.
Two I’d strongly recommend are the Capital One Quicksilver Cash Rewards card or Chase Freedom Unlimited card. The Quicksilver card has 15 months of 0% APR and a $150 bonus. Chase Freedom Unlimited has 15 months of 0% APR and 3% on the first $20,000 you spend in your first year (1.5% thereafter).
Or if you spend a lot at supermarkets and gas stations, the Blue Cash Everyday card from American Express would be right up your alley with 3% back at supermarkets and 2% at gas stations. That’s in addition to the $150 welcome bonus and 15-month 0% intro offer. Learn more here.
As for harder calls…
The obligatory advice
Cable: The average cable bill works out to $1,284 a year. Comparatively, you’d pay $71.88 for Hulu or $99 for Amazon Prime. Heck, even with the two together you’d pay $1,114 less than cable each year.
Worried you’ll miss out on too many shows? Make a list of the programs you watch and compare that to Hulu’s and Amazon Prime’s offerings. Chances are, most or all of your shows will be covered. (Bonus: Get Hulu through Swagbucks for $30 worth of SB. And get a $15 Amazon GC by signing up for Amazon Prime through Mr. Rebates.)
Subscriptions: Cancel some of those subscription services (especially the ones you barely use). Yes, yes, I know you love your Audible subscription, but at $14.95 a month you’re paying $179 a year for audiobooks that are almost definitely at your library. And if the library doesn’t have it, you can request the book be purchased. So far, all the books I’ve suggested have been purchased.
Phones: Now’s also the time to switch to a cheaper phone service.
Look into prepaid services, like SmartTalk or Mint Mobile. (Bonus: You can get $15 cash back for Mint through Mr. Rebates.) Don’t want the hassle of buying ahead of time? Check out Ting which is a postpaid, pay-for-what-you-use plan.
You can easily save at least $40 a month through these services, which is $480 a year off your expenses.
Groceries: Food is almost always a place that we can save. If you’re tired of the same old suggestions, check out the “12 ways to save on groceries” that Mom wrote over on her site. It’s got a few tips you probably haven’t seen before. Just remember, trimming even $20 a month off your food bill is $240 in savings over the course of a year.
Downsize: If you’re renting, decide whether you could do with a smaller or slightly less nice place if it means saving $50 to $100 a month (aka $600 to $1,200 a year). Yes, nicer buildings’ amenities are great, but do you really use them? If so, then by all means stay! But in my experience people rarely use those fitness centers and pools. Certainly not enough to justify the extra cost.
Save on the gym: Gym memberships can run $60 to $100 a month, and most aren’t used all that often. Switch to a cheaper gym like Planet Fitness or, better yet, figure out ways (YouTube! Running! Walking!) to exercise outside the gym. Check out this post for more ways to save on your workout routines.
And if you’ve already trimmed your expenses to the bone and dealt with your credit card debt? Then it’s time to boost your income through side hustles if at all possible.
Whether that means being a rideshare driver, making deliveries (for a restaurant or through GrubHub/PostMates), or selling things on resale sites like Poshmark or eBay, there’s probably a way for you to bring in a little more money.
Of course, none of this money is saved until you actually save it. Otherwise, it disappears into the ether of general spending. You have to make sure that those funds you’re saving from your new cell phone plan and the freed-up money from cancelled subscriptions actually get tucked away. Otherwise, all of your efforts are for naught.
So as you nix expenses, set up automatic transfers to savings for those amounts. This makes sure you can actually point to where these “savings” are going.
Are you surprised by any of the study’s findings? How does your saving rate stack up against your fellow Americans’?