On average, Americans don’t save enough money. According to the 2012 Annual National Survey Assessing Household Savings, almost one in three Americans don’t have enough money set aside to cover a small emergency, such as a car repair or doctor visit. And almost half are unprepared for retirement.
Raising public awareness of these issues was the reason America Saves partnered with the American Savings Education Council to create America Saves Week. Both of these organizations are non-profits dedicated to helping people learn how to save money and build wealth.
America Saves Week – Eye-opening Numbers
The 2012 Annual National Survey Assessing Household Savings found that:
- Only 66% of Americans spend less than their income and save the difference
- Only 66% of Americans have sufficient emergency savings to pay for unexpected expenses like car repairs or a doctor’s visit
- Only 42% of Americans say they have a savings plan with specific goals
- Only 52% of non-retired Americans think they are saving enough for a retirement in which they will have a desirable standard of living
These are eye-opening numbers, but it wasn’t all doom and gloom. The survey also stated that having a savings plan with specific goals can have beneficial financial effects, even for lower-income families.
How You Can Take Action in Your Life
Create a savings plan with a specific goal. Do it.
It’s that simple.
OK, you’re right. It might be that simple for some, but not for everyone. The truth is that we are all at different places in our lives and finances. The key is to make an honest assessment of your situation. Take a hard look at your income and expenses. Find a way to cut spending, or find a way to earn more money. Then work on creating a savings plan that will help you reach your financial goals.
Create Your Savings Goals
Even though we are all in a different financial situation, we can all stand to improve our finances. Here are some tips to get started with your savings plan. If you have already reached some of these goals, move on to the next one. If you have completed all of them, then take some time to review your financial goals, and your plans to reach them to make sure you are on the right track. You may find that you can set more aggressive financial goals.
Save for Emergencies. The best place to start is with a basic emergency fund. A good rule of thumb is to save until you have about $1,000 in cash savings. This is usually large enough to get you through any small to medium emergency or large unplanned expense. Something like the deductible on your auto policy, a small medical emergency, etc. The power of the emergency fund comes from avoiding going into debt for unplanned expenses. A thousand dollars can help you avoid taking out loans and paying high interest rates. In this case, a thousand dollars can help you save hundreds or thousands of dollars lost to interest payments.
Pay Off High-Interest Debt. After you have your basic emergency fund, it’s a good idea to pay off any high interest debt you may have. This can include credit card balances, student loans, car loans, or any other loans you may have. A good way to pay off your debt more quickly is to transfer your credit card balance to a 0% interest credit card, which will help you pay off your debt more quickly.
Save Automatically. The best way to save is to make it automatic. It’s much easier to save money when you don’t have to think about making a transfer, writing a check, or wiring money. Where and how you save will depend on your individual savings goals. You can start by opening an online savings account, setting up automatic transfers, or beginning to invest with an employer sponsored retirement plan, like a 401k(k).
Here are two common savings goals to save for:
- Save for Retirement. A good place to start is with an employer sponsored retirement plan, such as a 401(k) or 403(b). These are even better if your employer offers a matching contribution. Opening an IRA is another great way to save for retirement.
- Save for a Large Purchase. A large purchase is whatever you determine it to be. It could be saving for a vacation, a car, a house, college tuition, etc. The point is to make a savings goal, and work toward it.
Stick with the Program. Setting new goals can be energizing and exciting. Then the shine wears off. This is when you need to pull out your list of goals and review them to make sure you are staying on track. Remember, these are long term goals and need to become a part of your lifestyle for them to be effective.