Saving is becoming a lost art. Over the past 50 years, more and more Americans are finding themselves challenged when it comes to putting money away for a rainy day.
The current average personal savings rate is hovering around the 4 percent mark after hitting a peak of over 14 percent in the mid 1970s, according to the Bureau of Economic Analysis at the U.S. Department of Commerce. Even fifty years ago, before savings rates started to skyrocket, Americans were putting away roughly double (8 percent) of what they’re saving now.
To put all this in perspective, we talked about Americans’ savings habits with Andrea Woroch, a savings expert who has appeared on broadcasts such as Today, Good Morning America and The Dr. Oz Show, and who has been quoted in publications such as The New York Times, Kiplinger’s Personal Finance, and SmartMoney.
Why have Americans been saving so little in recent years?
I would just say that people have tighter budgets and more expenses. In general, the cost of living has gone up — especially if you consider all the added expenses consumers have these days with new technologies, like mobile devices and the Internet. There’s also the rise in the cost of higher education. Plus, grocery prices are increasing, especially with the recent drought across the Midwest. Not to mention, the significant rise in gas prices over the last decade!
In the times when my mother and father were growing up, designer goods weren’t things most people bought. But today you see people at maybe all different income levels wearing designer goods. That may be because those designer items are more accessible via the technology out there, like daily deals, or eBay where you can buy other people’s used designer goods.
How has all this hurt their savings accounts?
Now families don’t have emergency funds set aside, and they’re using what they would have saved for retirement for everyday purchases.
People are spending more than they used to. They definitely have higher expenses and less money to spend.
What do people need to think about when it comes to savings?
Now people have to pay for their accounts. But we’ve also seen the creation of online savings accounts, which can be more enticing to consumers because of the higher interest and lower fees they offer.
Having savings and emergency savings is very important. It will protect you when you need emergency medical care or if you become unemployed. Having that emergency account will pad your finances and keep you from getting into a deep financial hole. You need to make sure you have enough saved up to cover six to nine months of living expenses.
As for retirement savings, the more you start saving now, the less you’ll have to put away when it comes close to your time to retire. The younger you are when you start saving for retirement, the better off you’ll be in the long run.
Are you saving more or less than you used to? How do you manage to put money away?