The State of Savings In The United States

Savings

Bankrate came out with an updated study on the amount of money Americans are savings. The good news is that there are some Americans that are doing well with saving their money. The bad news is that way too many of us are still lacking in the money-saving department. How do you overcome this if you are in the non-saving category? I will walk you through some of my tricks that help me to save. Hopefully, you can use them to your advantage as well.

Saving 15% Of Your Income

The study found that middle-class earners were the best at saving 15% or more of their income. Here is a chart that breaks down the percentage of people in a given income range who save 15% or more of their income:

The findings shouldn’t be surprising, based on the numbers. First off, the difference in saving rates could simply be related to math. For example, if someone is that saving 10% of a $50,000 salary is saving $5,000 a year while someone saving 10% of their $125,000 salary is saving $12,500 a year. The wealthy can get away with saving a smaller percentage of their income simply because of the size of their income.

In addition to this, those earning a lot less will have a tougher time saving a larger percentage of their income. Most of their pay is going towards basic living expenses – housing, food, etc. While they still can save, saving 15% or more might be a stretch.

Saving Little Or Nothing

The scary part of the study is that 55% of 18-29-year-olds save 5% or less, including nothing for the long-term. While there are a variety of reasons for this, the overwhelming reason is probably due to the thought of retirement being in the distant future.

With new smartphones and our favorite band coming to town in the near-term, thinking about saving for an event or lifestyle that is 30-plus years away is going to take the backseat. I know the power of short-term gratification all too well. It’s what helped me to get into credit card debt at a younger age.

How To Start Saving Money Today

If you are someone who is not saving enough for retirement, or even saving in general, how do you get started? There are a few tricks I use and think they would benefit you as well.

Get A Detailed Picture Of Your Retirement: When most people see their retirement, they envision themselves no longer working. This is great, but for most of us, this isn’t exciting enough to make us want to forgo the smartphone so we can save for that future day of no longer working.

To overcome this, you need to get detailed. What exactly does retirement mean to you? Will you travel? Will you play golf? The more detailed you can be, the greater the excitement will be about retirement and the more likely you will be to start saving for it.

Understand Time: Look, I know 30 years seems like a lot of time, but time is your best friend when saving for the long-term. The more time you have, the less money you have to save. For example, imagine trying to move a boulder up a long gently sloping hill versus a short, steep hill.

For the gently sloping hill, you could probably just move the boulder yourself or even employ the help of a horse and a cart to get the boulder up the hill. But with the steep hill, you can’t move the boulder yourself and you will most likely need 5 or 6 horses to help you.

Saving for retirement is the same way. If you start now (assuming you are in your 20’s or 30’s), you can get away with saving $200 a month and still enjoy a comfortable retirement. But if you wait until you are in your 50’s, you are looking at saving a few thousand dollars a month. That’s a huge difference. Remember, time is your friend.

Automate Things: I love automating things because it works. I set something up once and I am done with it. In the future, the task still gets done, only I don’t have to do anything about it. When it comes to your finances, automating your savings is a no-brainer.

Set up a recurring monthly transfer to your savings account and you are set. There is even a service out there now that will do automatic transfers for you in small amounts repeatedly throughout the month.

Heck, you can even go with a robo-advisor and have your investing automated too! The more you can automate, the greater the odds are you will save money. This is why most companies now auto-enrol you into a 401k plan. It works.

Final Thoughts

At the end of the day, you have to save money. The tips above will help you save more money if you are struggling to save. While retirement may seem like a far way off, remember to use time as your ally and save now. The more you save now means the sooner you can take advantage of the detailed plans you have for your retirement.