The good news? Americans are saving a greater share of their disposable income than they have in decades. The not-so-good news? Many people still need to do more, since they can't cover an unexpected bill.
Through October, the personal saving rate — the percentage of disposable personal income that people set aside for investments in the market, such as retirement, or real estate — has averaged about 8.1%, according to figures from the Bureau of Economic Analysis. The saving rate provides insight into the financial health of Americans and clues about the pace of economic growth.
Aside from 2012, when this rate spiked briefly, the portion of income that Americans are saving is the highest it's been since the 1990s. It's also increased since the early 2000s when the saving rate dipped near 2% in 2005 and hovered in the 3% to 4% range for much of 2005 to 2007.
There can be a downside to a high nationwide savings rate. When consumers save more, they have less money to buy other stuff — in fact, because consumer spending accounts for more than two-thirds of gross domestic product (GDP), some people say the higher saving rate is to blame for sluggish economic growth this year.
"We've certainly made advances," says George Barany, director of America Saves, a campaign that is managed by the Consumer Federation of America. "The reality is that it's still very difficult for people to save, not only for an emergency but also for quality of life."
Barany points to an oft-cited statistic: Nearly 40% of Americans would struggle to come up with $400 to pay for an unexpected bill, according to a 2018 report from the Federal Reserve on the economic well-being of U.S. households. To cover such an expense, some people said they'd carry a balance on a credit card or borrow money from friends or family.
There's no "right" amount you should save, since the ideal rate for you depends on your financial situation and having enough money to cover emergencies. That said, experts generally recommend you put at least 10% to 15% of your income toward retirement each year and, in addition, you save money for your goals and in case of an emergency.
Here are some ways to increase the amount you're saving.
While 82% of workers receive their paychecks via direct deposit, only 24% split that deposit into multiple accounts, according to figures from the National Automated Clearing House Association, which oversees the electronic payments system. This highlights the discomfort many people have with allocating a portion of each paycheck to savings, Barany says.
"There's a disconnect of people who have access to the plumbing but don't turn it on to save," Barany says.
Where to start? Rather than focusing on a percentage of your income, find a dollar amount that you're comfortable with to begin, even if it's as little as $10 to $20 each paycheck, Barany recommends. Then direct that amount into a separate account, so you can automate this savings process.
"Give it a test to see how that accumulates over time and how to live without it," he says.
That $400 referenced in the above Federal Reserve study is a good starting place for a so-called rainy day or emergency fund. By saving $20 a week, you can amass that amount within five months. Put that money in a high-yield savings account and you could earn 20 times more in interest, which puts you even closer to that goal.
This fund will help you to "fend off those emergencies that hit all of us at different times," Barany says. "You can't live without experiencing those pitfalls."
Even if the amount you have saved doesn't fully cover the expense, it still helps, according to Marguerita Cheng, a certified financial planner and the CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
Say you need $800 to replace the tires on your car. "Maybe you only have $500 [set] aside and the tires cost $800," Cheng told Grow earlier this year. "Charging the $300 difference on a credit card is a much more manageable sum to pay off."
Video by David Fang
You don't need to stop at $400, either. A longer-term goal is to have enough savings to cover three to six months worth of living expenses.
If you're looking for other ways to save more money, here are some Grow resources that can help:
Take a look at where you're spending money each month. You may be able to find some easy ways to cut back on what you're buying, which will allow you to save more money.
From trips to the grocery store to your lunch at work, there may be opportunities to trim your food-related budget. More broadly, take a stab at trimming some of your other expenses like gas or airfare in the new year.
Finally, you could find easy ways to save $100 each month on household expenses.
Video by Jason Armesto
If you notice you're spending a lot of time scrolling through Instagram, you might want to cut back. A Schwab survey found that 49% of millennials say they have been influenced by social media to spend money on experiences.
If your budget looks a little bleary-eyed, you may want to cut back on booze. One food writer details how she's saved more than $10,000 since she quit drinking.
Finally, look at the timing of when you spending money, not just what for, because you may find that you can cut back during the tightest times of the month.
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