No matter how much experts may try to persuade all working Americans to set aside some of their income for emergencies and saving for retirement, they accept the reality that a certain percentage will never do it.
They probably just wish that certain percentage wasn’t consistently so high.
More than 1 in 5 working Americans (21%) aren’t saving ANY money for retirement, emergencies or other financial goals, according to Bankrate’s March Financial Security Index survey, released March 14.
“This result has shown little change over the past few years, consistently coming in at 20% or 21% since 2016,” says Greg McBride, CFA, Bankrate chief financial analyst. “Unfortunately, this means it hasn’t improved.”
Nearly half of working adults (48%) are saving something, but no more than 10% of their annual incomes. Only 1 in 6 employees (16%) report saving more than 15% of their yearly earnings.
The main excuse for not saving? Expenses.
According to the survey, 38% of working Americans have “too many expenses” (anyone else surprised this percentage isn’t 100%?). Across different income levels, age groups and regions, that’s the most common reason people aren’t saving more money.
But are people aware of where their income is going or are they spending it mindlessly? A 2018 Bankrate survey about financial vices found that the average American spends more than $2,900 a year on restaurant food, takeout meals, prepared drinks and lottery tickets.
“I wonder how many of them really scrutinize what they’re spending their money on,” Nancy Wong, professor and chair of the department of consumer science at the University of Wisconsin-Madison, told Bankrate. “And a lot of the time, like what most I think financial consultants would say, it’s actually the little things that add up.”
Sixteen percent of working adults claim they’re not saving enough money because their job isn’t good enough (doesn’t pay enough). And 13% blame their personal savings crisis on the amount of debt they’re carrying.
Some Americans (16%) say they just haven’t gotten around to setting any money aside. Twenty-two percent of Millennials feel this way.
Who is (and isn’t) saving
Compared with their wealthier counterparts, low-income working Americans are, predictably, more likely to say they struggle when it comes to saving money.
More than 4 in 10 households (45%) earning less than $30,000 per year aren’t saving any money. That’s the case for only about 6% of the highest-earning households.
Men are more likely than women to say they’re saving more than 15% of their income. About 1 in 5 men and 13% of women fall into that category, according to the most recent Bankrate survey.
There’s also a generational divide between who’s socking away more money. Older households (age 55 and above) are more likely than other age groups to be saving more than 10% of their annual income. Millennials and Gen Xers, on the other hand, are more likely to say they’re not saving any money at all (or they’re not saving more than 10% of their income).
The survey results may highlight some of the financial challenges Millennials face that make saving for retirement difficult, like student loan debt, the lack of wage growth and the increased cost of essentials, says Douglas Boneparth, president of Bone Fide Wealth and co-author of “The Millennial Money Fix.”
“There’s also greater pressures to spend,” Boneparth tells Bankrate. “You can’t ignore that we live in a consumerism kind of society that’s being amplified by things like social media.”
Gen Xers are in a similar financial boat.
“I think Gen X has even greater responsibilities than Millennials do, specifically when you think about college savings and expenses like that,” Boneparth adds.
Save it before they can spend it
“Saying you haven’t gotten around to it is a lousy excuse,” McBride says. “Having money tucked away for unplanned expenses and actively saving for retirement are too important not to prioritize.”
The most effective method to save more money, McBride says, is to do so automatically. “Set up payroll deductions that go directly from your paycheck into a dedicated online savings account for emergency savings and a workplace retirement plan or an IRA for retirement savings. Save it before you get the chance to spend it.”
McBride advises consumers that now is the time to make saving money a priority, saying most business economists predict we’ll face a recession by 2021.
“The labor market is the tightest it has been in 50 years, and the wage growth is the highest in a decade,” McBride says. “Now is the time to make hay while the sun shines and put some money away for when things aren’t so good.”
The survey was conducted for Bankrate by SSRS, who interviewed 1,003 respondents via telephone. Interviews were conducted from Feb. 26-March 3, 2019. All SSRS Omnibus data are weighted to represent the target population.