Ever feel like you’re behind on your savings—like you don’t have enough set aside for an emergency or haven’t invested enough for retirement?
If the answer is “yes,” you’re not alone. Most Americans have insufficient savings on hand for emergencies or to meet their future needs—leaving them feeling financially stressed.
But it doesn’t have to be that way. For those Americans who lack an adequate financial cushion, change may be a matter of adjusting your mindset and developing better savings habits.
That’s the message of America Saves Week (February 23-28, 2015), a national campaign involving more than 1,000 non-profit, government and corporate groups working together to encourage Americans to save money and get on the road to financial security.
Coordinated by the nonprofit organizations America Saves and the America Savings Education Council, America Saves Week was launched in 2007 to encourage people to assess their own savings behaviors and to take positive steps to improve their savings status.
“Savings isn’t something you do once a year, or one week out of the year,” Nevin Adams, former director of the American Savings Education Council, explains. “However, America Saves Week gives us all a chance for a renewed focus on why it’s important to save, or to establish goals for saving, but the role that savings plays in helping us achieve our individual needs and goals. America Saves Week is a great time to revisit or establish those goals, and to start saving, or start saving more.”
Studies show Americans face savings crunch
That message is timely—because what’s clear is that while the economy has improved slowly over the last five years, Americans’ savings have lagged behind, according to recent research.
A study published just last month by the Pew Charitable Trusts, “The Precarious State of Family Balance Sheets,” explores the alarming reality about American families’ savings. Their findings are anything but reassuring.
The Pew researchers note that many financial advisors recommend holding three to six months worth of income in liquid savings that can be readily accessed in an emergency (say, to tide the household over after an unexpected job loss, or to pay for car repairs or a medical emergency).
“The typical household at the bottom has access to less than two weeks worth of income in checking and savings accounts and cash at home,” the report says. “It is important to note, however, that some or all of those funds may be earmarked for upcoming regular expenses such as food or housing.”
Even for more affluent households, high expenses or debt can put a crimp in savings plans, and they may hold less in liquid savings than is needed to ride out an emergency or financial shock.
The Pew researchers found that nearly “55 percent of households are savings-limited, meaning they cannot replace even one month of their income through liquid savings (money in cash, checking accounts and savings accounts).”
Those findings square with similar results of America Saves’ 8th Annual Savings Survey, which found that only about two-fifths (40%) of Americans reported making “good” or “excellent” progress toward their savings goals. Just 42% of those surveyed said they had a spending plan to meet specific savings goals.
The good news is that the 71% of respondents that said they spend less than they earn save the difference. That shows some improvement over the last few years, but is still down from the 73% who said the same in 2010.
“Americans are saving a little more effectively today than a year ago, but only a minority are doing so very successfully,” says Stephen Brobeck, a founder of America Saves and executive director of the Consumer Federation of America.
Changing your savings habits
America Saves Week is aimed at turning that trend around and helping American families to better their savings situation. The America Saves Week website offers a variety of ways for participants to get involved, including:
- Taking the America Saves Pledge;
- Exploring an interactive tool to assess your own savings behaviors;
- Participating in the #imsavingfor photo contest on social media;
- Sharing your savings stories on the America Saves site;
- Watching a video series on the importance of saving, and more.
There’s evidence the campaign is getting results. Last year, America Saves checked in with those who had been part of the campaign since 2010, and found that participants reported saving a median of $3,000 since joining the campaign.
Get started saving
If you Google “strategies to save money,” be prepared for an onslaught of suggestions from a staggering array of sources. But here are a few popular favorites that can help build momentum for bigger wins:
- Have a budget. Don’t know where the money goes after you get paid? Stop guessing. For 30 days, track how much comes in and where every penny goes. Knowing how you’re spending is the first step toward making a plan to get a handle on your savings.
- Make it automatic. Most banks and financial institutions make it easy to set up online access to your account, where you can create automatic transfers to move funds from your checking to a savings account. Not having to think about it makes saving money a sure thing—and your nest egg will build up faster.
- Build an emergency fund. Set up a separate savings account and set an achievable goal for an emergency fund—say, $500 or $1,000. Once that fund is in place, only access it for a real emergency (like an car repair, medical bill or other unforeseen need). You’ll sleep better knowing that a new brake job won’t completely throw off your budget.
- Sign up for a retirement account. If your employer offers a 401(k) plan and you’re not participating, now’s the time to change that. The savings will be deducted from your paycheck before taxes, and in most cases your employer will match a portion of your contribution, so it’s like getting free money—don’t pass it up. And 401(k) accounts are portable, so it can move with you if you get a new job.
- Cut your debt. If you’re in a hole, stop digging. If you’re carrying credit card or other high-interest debt, now’s the time to commit yourself to paying it down. You’ll save on interest and monthly payments—giving you more breathing room to boost your emergency and investment funds.
That’s only the tip of the iceberg—check out the America Saves page on “54 Ways to Save Money” for more ideas to cut your expenses and build your savings momentum.
The Securities Industry and Financial Markets Association (SIFMA) supports the campaign to encourage Americans to save more effectively, because we recognize that savings are key to financial stability and wealth creation.
Regardless of your goal—whether it’s to pay down debt, build an emergency fund, pay for education or save for retirement—there’s no time like now to start building a better savings habit. Check out the America Saves Week site for ideas on how you can get started toward your goal.