Over Past Decade, Savings Habits Eroded, According to Tenth Annual Savings Survey

WASHINGTON – The tenth annual America Saves Week survey revealed that fewer than two-fifths (38%) of American households report good or excellent progress in meeting their savings needs, with over one-quarter (27%) indicating no progress at all. The survey findings were released on the first day of the eleventh annual America and Military Saves Weeks. More than 1,500 nonprofit, government, and business organizations at the national, state, and local levels have joined to promote personal savings.

America Saves, managed by the Consumer Federation of America (CFA), and the American Savings Education Council (ASEC) coordinate the Week. With their support, ORC International undertakes the savings survey. This research firm interviewed a representative sample of 1,007 adult Americans on January 26-29 by landline and cell phone. The margin of error is plus or minus three percentage points. The survey data is available to the press on request.

Over Past Decade, Perceived Savings Outcomes Worsened Then Improved
Analyzing data from all ten annual surveys reveals that perceived savings outcomes first worsened then improved somewhat.

“The Great Recession and recovery from this debacle help explain these trends,” noted Stephen Brobeck, CFA Executive Director and a founder of America Saves. “During the decade, employment, incomes, stock prices, and home values declined then rose, first depressing personal saving and then allowing it to grow,” he added.

Between 2007 and 2013, according to the Federal Reserve Board’s Survey of Consumer Finances, median net worth (in 2013 dollars) declined by 40.0 percent, from $135.4 thousand to $81.2 thousand. Because of the economic recovery, the 2016 survey, expected to be released in the coming year, should show gains in household net worth.

Over Past Decade, Savings Habits Eroded
Surprisingly, during the past decade saving habits eroded.

Those who know their net worth are more likely, than those who do not, to allocate their income to saving rather than spending. Research has shown that those with a saving plan save far more than those who do not. The only effective way for most Americans to save is automatically at or outside work.

“The erosion of saving habits during the economic recovery was unexpected,” noted Brobeck. “I suspect that low savings yields and less promotion of saving by many banks and credit unions had something to do with this, as did the preoccupation of some households with obtaining relief from crushing debt burdens,” he added.

Few Lower Income Americans Report Good Progress in Meeting Savings Needs
Whether Americans report making progress in meeting their savings needs is strongly associated with household income.

Nearly two-thirds (66%) of those with incomes $100,000 and over report good or excellent savings progress, with only seven% indicating no progress. In contrast, only 14% of those with incomes below $25,000 report good or excellent savings progress, and 58% said they are making no progress at all.

These numbers are consistent with the percentages of the two income groups who said they were saving at least 5% of their incomes—77% of the upper income group but only 24% of the lower income group. Only seven% of the upper income group, but 53% of the lower income group, said they were saving nothing at all.

“While it is difficult for many lower-income families to build savings, most have the ability to save funds that will help meet emergencies in the near future and supplement Social Security payments in retirement,” said Brobeck. “The most effective way to do this is through automatic deposits from paychecks and/or checking accounts into regular and retirement savings accounts,” he added.

 

 

 

 

in Economic News