Let's face a harsh reality, Americans suck at saving money.
Collectively, as a whole, together, one nation under God, we are the best spenders… in the world.
In fact, we are such great consumers of goods, products, and services that you can take the entire country of India and it's one billion people and we will still out “Consume them.”
We are really good at spending money and really bad at saving money.
Automation, one-click shopping and the constant bombardment of consumerism makes it more challenging each day to save.
Global commerce giants such as Walmart, Amazon, Costco and many others with the help of big data are trying to find ways to make you spend more money.
To the point where savings rates have never been lower!!
Just how bad is the savings rate?
American's in 2017 were saving just 2.5% on average. In other words – as a whole, American adults were not even saving enough to cover inflation.
This got me thinking, why can't I save money?
Why I Can't Save Money.
The stats are scary when it comes to the average American adults saving rate. With adults only saving at a rate of 2.5%, there has to be a reason we are not saving more, right?
Each and every day, it is estimated we are exposed to 5,000 brands or advertisements. That is about 4.500 more then if you lived in the 1970s.
You can order Cheez-Its (My favorite) with a button and have someone deliver your groceries to your home… all while you are busy watching a movie you rented on your phone.
The daily luxuries of the digital age are nice, but they come with a price tag:
People simply are not saving money.
Like many things that have changed from the 1970s, 80's and even the '90s, the rate at which Americans are now saving is extremely low. In fact, the Millennial generation as a whole is only saving about 3.5% of what they make (give or take) and it is recommended they save AT LEAST 15% to consider actually retiring.
In December of 2017, according to Slate, Americans were saving at a rate of 2.4%… the lowest since 2005. In fact, it is only the third time that savings rates have dropped below 3%.
For better or worse, this doesn't appear to just be a blip on the radar either.
As stocks sore and confidence is high, more people are spending and not saving. The bigger issue at hand – people are probably spending money they don't have
Related Content: How Much Should You Have Saved By Age?
Saving stats don't lie.
Go find 10 people, line them up, and chances are 7 of the 10 do not have $1,000 in savings (According to a recent Go Banking Rates survey, 69% of working-class adults do not have $1,000 in a savings account).
Even scarier, 34% reported not having a single dollar in savings. If you are reading this and you have $5,000 or more in savings – congrats welcome to the 20 percent when it comes to saving.
As far as savings accounts go, if you have…
- $1 in savings you're in the top 70%,
- $1,000 in savings top 30%
- $5,000 in savings top 10%
While the factors that contribute to the lowest savings rate in history stem from many issues like cost of living increases, student loans, daycare expenses, and inflation – the biggest problem is most likely two things:
- Lifestyle inflation
Lifestyle inflation is a term that refers to someone who spends more to keep up as they make more. It is why you hear stories about doctors bringing in multiple 6 figures, yet they don't have a 7 figure net worth.
The inflated lifestyle and the ease at which Americans can and do consume things results in lots of spending (Keep in mind our economy runs on spending).
Some speculate that if the country of India consumed as much as Americans did each year the world could only support 1 billion people. In other words, our economy and lifestyle rises and falls on spending money – the antithesis of saving.
What savings used to be.
In the 1960s and 1970s, American saving rates were consistently above the 10% mark, staying that way until the mid 80's when Americans started saving less and less.
The good ol' days of only getting what was necessary and stockpiling the rest was a bit more ingrained, considering the boomers were raised by parents who grew up in the Great Depression.
Most of the boomers can relate to the classic statement, “If you want something, save up and by it yourself,” while the millennial generation as a whole has implemented the, “You only live once strategy,” when it comes to saving money.
Money was seemingly harder to come by for some people 50 years ago and for that reason, it was a bit more challenging to let it slip through your fingers. Think about it, your grandparents couldn't walk a dog or drive their car around to make a quick $500.
So why aren't more people saving at a higher rate? Why can't you save money?
Confidence in the economy.
In 2017 Americans spent more money on big-ticket items like the new truck or fancy car, as well as, expanded their budgets for things like eating out and entertainment according to Market Watch.
With stock prices soaring, more small business owner confidence, and a generally good feeling in the American economy, the overall feeling can be attributed to falling personal saving rates.
Just because people are not saving at a high rate doesn't mean there should be a cause for concern. But it is wise to have an emergency fund saved up that could run you 6 months.
Save this by age.
Ultimately, experts recommend working towards these amounts once you enter the workforce. According to CNBC Money, here is how much you should have saved by age:
In your 20's – Aim to save 25% of your gross pay
By age 30 – Have one year of your salary saved
By age 35 – Have twice your annual salary saved
By age 40 – Have three times your annual salary saved
By age 45 – Have four times your annual salary saved
Catch the trend? By age 65 it is recommended you have nearly eight times your annual salary saved!
All this talk about why people are not saving is good to know, but the question is, how do we save more? Here are some simple ways to start saving more money!
Nine Ways to Start Saving More Money!
Here is a quick list of savings habits so you can stop being the person who keeps asking, “Why can't I save money?” (For a full list of 17 ways to stop spending money, read this here)
- Automate Your Savings – For starters, come up with an amount that you will autosave each paycheck. Have it roll right into your savings account when your direct deposit hits. If you are someone who doesn't have a steady pay schedule, consider finding a % that works for you every time you get paid and deposit that amount.
- Separate Savings & Checking Accounts – Next, highly consider using a separate savings account outside of your checking account. Why? So you do not have easy access to your savings. Savings literally means to keep for future use. Tapping into your savings every time you want something at the store is not what savings accounts are for. Ally Bank is where we keep our emergency fund and they recently jumped their interest rate to 2.2%.
- Stop eating out so much – have a limit like $50 a month and use cash.
- Meal prep more often – most people spend money on food when they are not prepared. Consider meal prepping.
- Submit reimbursements ASAP – if you are someone who spends money for work, get your reimbursements in quicker.
- Stop falling for “sales” – quit rationalizing every purchase as a good deal.
- Cut the cable – Save $1200 a year by simply cutting the cable subscription (Sorry Mr. Ajit Pai).
- Get rid of two things before you buy a new thing – Sort of unique, but if you know you have to donate two shirts you might be less tempted to by the new shirt.
- Go to more free events – Entertainment adds up quickly. Look around for free movie nights and music nights in your community. Consider going to a winery that allows you to bring your own food. You can read about ways to have fun.
- Get outside more – Aside from saving money by going on hikes and playing outdoors, there is a large amount of research proving that outdoor activities will make you happier and healthier.
- Use credit card reward dollars for entertainment – Use travel rewards, miles, points, and cashback cards as much as possible to cover travel and entertainment costs. Bank of America currently offers a $150 cashback card we use for gas purchases.
- Use Acorns– Acorns is an app that automatically rounds up every purchase you link to the nearest dollar, and then invests (Saves) that money! In one month we saved $16 just from purchasing things. That is $16 we never would have saved!
My Savings Takeaway:
Real quick, if everyone jumps off the bridge do you?
I remember my mom used to ask me that same question when my friends made poor choices and I was about to do the same. In other words, just because most people are not saving as they should, doesn't mean you should follow in their footsteps.
Start saving just a little from each paycheck. For example, every time I get a raise I increase my contributions to my retirement account from that raise.
Save now, live better later (Sorry Walmart, but we are on the savings train now!!!)
Q: What is the magic number you want to save each month?
P.S.If you don't want to automate your savings, at least get on a budget! Here is a living forecast worksheet to use!
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎