Americans are not saving enough money.
A 2019 survey by ING revealed that 27% of Americans admitted to having no savings.¹
A 2018 analysis of federal data found that a typical household savings account in the United States holds $8,863 (excluding retirement accounts) – far less cash than most people would need to cover a few months without income.²
Why is it so challenging to save money?
There are several barriers people face when it comes to saving money. Low wages plus a high cost of living make it very difficult.
Most Americans having access to a lot of available credit also makes it difficult to save more. Because why should you? You can practically buy anything with credit at any time and therefore have no incentive to save money in order to pay for expenses.
Afraid to face the music? If you know you are behind on saving, you may be avoiding it altogether. Sooner or later, you will need to face it, and hopefully sooner than later. The longer you wait, the worse the problem will become. The best time to start saving was yesterday, and the second-best time is right now.
Another factor holding back savings rates is lifestyle choices. Your peers seem to be doing well financially. You’re not sure how much they earn, but probably not much more than you. Yet you see them upgrading to an $800k house and pulling up in a new Range Rover. What gives? If they can afford it, you should be able to as well. You feel like you need to keep up to be able to stay relevant in your community.
What Do You Want?
Remember that financial success is a long game. Having a higher savings rate will pay off more in the long-run. One of the main takeaways from the “Millionaire Next Door” is that status items are for show-offs. Authors Thomas J. Stanley and William D. Danko reveal that you likely have many millionaires living around you. You just don’t know it because they don’t show it – they have found more ingenious ways to use their money than spending it on designer clothes and expensive cars.
What is more important to you? Perceived status today, or financial freedom tomorrow? Because those are your options.
Hard Work Is All It Takes, Right?
I also hear people say, “I work hard, and therefore I should be able to buy what I want, have the lifestyle I want, etc.” It’s just not that simple. Financial success is not a product of hard work alone. It also requires delayed gratification, patience, and consistency. Hard work is one component.
A Method That Works
The trick to saving more money is to set up automatic deposits into a savings account. Don’t wait until after you have paid all your expenses to see how much money you have leftover for savings. Saving needs to become a priority.
Chime found that their customers who enrolled in their automatic savings programs saved an average of 240% more than those who did not register.
Research performed at Harvard found that when employers automatically enroll their workers in retirement plans — forcing them to opt-out rather than sign up, significantly boosts participation rates.
One of the best ways to boost your savings is to turn on direct deposit. Trick your brain by not engaging it at all. Put your savings on auto-pilot. One year from now, you can either look back and be surprised by how much you saved or be surprised by how little you have saved. So save early and save often.