Do you know how much Americans have in their savings accounts? Brace yourself for a shocking revelation: on average, American households have a mere $41,600 in savings, according to data collected by the Federal Reserve in 2019. But wait, it gets worse. The median balance for American households is a measly $5,300, according to the same data[^1^].
Now, these numbers might not accurately reflect the financial situation of many Americans. In fact, in 2020, the Federal Reserve reported that only 64% of Americans had enough money to cover a $400 emergency[^1^]. That’s right, the majority of Americans don’t have enough savings to handle unexpected expenses.
But here’s the real kicker: a recent report called “The Paycheck-to-Paycheck Report” revealed that a staggering 60% of adults in America live paycheck to paycheck[^1^]. And get this, four in 10 of those paycheck-to-paycheck folks are considered high-income earners. Even though the overall percentage is down 4% from January 2022, it’s still a cause for alarm[^1^].
With economic uncertainty hanging in the air, it’s crucial to prioritize building up your emergency fund. Having savings on hand for unexpected situations is more important now than ever. Plus, maximizing your savings opportunities can help you reach your life and financial goals quicker[^1^].
Now, let’s dive deeper into the savings habits of Americans and discover some tips to supercharge your savings game.
Average Savings in America
Let’s start by looking at the average savings in America. Most of the data we’ll be discussing comes from the 2019 Survey of Consumer Finances conducted by the Federal Reserve[^1^]. The survey provides valuable insights into the financial health and habits of American families.
Here’s what the data tells us: there’s a significant difference between the median and average savings amounts. This suggests that there are outliers with higher balances, which drive up the average savings. It’s essential to consider both numbers to get a complete picture of savings habits in the U.S[^1^].
Average Savings by Age
Unsurprisingly, Americans’ bank account balances tend to increase with age. The survey data shows that participants aged 75 and older have the highest median savings balance. On the other hand, participants under the age of 35 have the lowest median and average balance amounts. This aligns with the fact that younger Americans, including college students and entry-level earners, have limited opportunities to save[^1^].
Average Savings by Education Level
Having a college degree has often been associated with better financial opportunities. While this can be true, the Federal Reserve data reveals a significant gap between the median and average savings balances of college graduates compared to those without a bachelor’s degree. Even within the group of survey participants with a college degree, there is still a notable difference between the median and average balance amounts[^1^].
Average Savings by Income
No surprises here: income plays a significant role in how much Americans save. The survey data shows that households with higher incomes have the highest median and average savings balances. However, it’s interesting to note that the gap between the highest-earning group and the second-highest group is substantial, despite only a $10,000 difference in income range[^1^].
Average Savings by Race and Ethnicity
Unfortunately, there is a significant gap between the average account balances of white and “other” groups compared to Black and Hispanic households. This disparity can be attributed to various economic factors, including income discrepancies. The data clearly demonstrates that building savings can be more challenging for some racial and ethnic groups[^1^].
Historical Trends in American Savings
Historically, Americans have prioritized savings. From 1975 to 2007, savings deposits experienced small, incremental growth. However, the financial crisis in 2008 led to a significant increase in overall U.S. savings deposits through 2019[^1^].
How Much Should You Save?
Financial experts often recommend having an emergency fund that covers three to six months of expenses. Beyond that, the amount you save depends on your financial goals. Whether you’re saving for a down payment, education, or retirement, it’s crucial to determine your monthly expenses and set realistic savings targets[^1^].
Tips to Boost Your Savings Faster
Ready to level up your savings game? Here are some tips to supercharge your savings efforts:
- Compare rates: Shop around for high-yield savings accounts and money market accounts that offer competitive interest rates.
- Avoid high bank fees: Look for accounts with minimal fees that won’t eat into your savings.
- Separate your funds: Keep your savings separate from your everyday funds to avoid unnecessary spending.
- Automate savings: Use automation tools to set up recurring transfers from your checking to savings accounts.
- Use windfalls for savings boosts: Capitalize on unexpected money like tax refunds or cash back apps to bolster your savings.
- Save what you can: Remember, any amount you save is better than nothing. Start small based on your current situation and gradually increase your savings contributions[^1^].
Build Your Savings Starting with an Emergency Fund
It’s time to take control of your financial future. No matter where your savings account balance falls on the spectrum, building up your savings is essential for a secure future. Having a robust emergency fund can provide you with peace of mind and protect you and your family from unexpected costs[^1^].
Remember, your savings journey starts with taking small steps. Set realistic goals, automate your savings, and be consistent. As you see your savings grow, you’ll inch closer to reaching your financial dreams and providing a better life for you and your loved ones[^1^].
So, are you ready to join the savings revolution? Start growing your savings today! And for more juicy secrets on personal finances, visit Personal Finances Blog for expert tips, helpful advice, and inspiring stories that will guide you on your financial journey[^1^].
Rates updated as of June 19, 2023.
Frequently Asked Questions (FAQs)
Where should you keep your savings?
You should keep your savings in an accessible account, such as an online high-yield savings account or a money market account, that offers higher interest rates and minimal fees. Certificates of deposit (CDs) are also a great option if you don’t need immediate access to your funds[^1^].
How much should you save at 20?
In your 20s, your savings may be limited due to lower salaries and financial responsibilities like student loan payments. However, you should start saving as much as you can to take advantage of compound interest. Paying down debt and keeping expenses low will also help you free up more money for savings[^1^].
How much should you save at 30?
The amount you save in your 30s depends on factors like your income, career goals, and financial aspirations. It’s crucial to budget your money wisely and start contributing to retirement accounts if you haven’t already[^1^].
How much should you save at 40?
Your 40s are a time to shift your focus to maximizing investments and preparing for retirement. Building an investment portfolio and paying off debt can provide you with more opportunities to save and invest[^1^].