Americans’ Savings Drop to Lowest Point in Years
A large number of Americans have less than $300 in savings, an amount lower than in previous years – reflecting the toll of the pandemic on people’s financial health.
A new GOBankingRates survey finds that 40% of Americans have less than $300 in savings. This is a drop compared to the pre-pandemic figure of $400 in savings used by the Federal Reserve as a gauge for measuring households’ financial well-being.
In its 2019 Economic Well-Being of U.S. Household survey, the Fed stated that “relatively small, unexpected expenses, such as a car repair or a modest medical bill, can be a hardship for many families.” Additionally, “a substantial minority of adults were financially vulnerable at the time of the survey and either could not pay their current month’s bills in full or would have struggled to do so if faced with an emergency expense as small as $400,” the 2019 report notes, highlighting “the precarious financial situation that some families were in prior to the COVID-19 pandemic.”
“We find that people’s savings can serve as a kind of litmus test for their financial well-being in general,” said Andrew Murray, GOBankingRates’ content data researcher. “The 50-30-20 budgeting rule suggests people save 20% of their income, so when people don’t have any savings, or have to withdraw from it unexpectedly, it’s a good indicator that they are struggling financially.”
Breaking down the GOBankingRates survey further, 50% of Americans have less than $600 in savings and 57.4% have less than $1000 in savings, compared with 69% of Americans with less than $1000 in savings in December 2019.
The survey also finds a massive gender gap for the $0-$300 range in savings, with 45% female vs. 29% male respondents.
“The gender gap in savings is likely an extension of the gender gap in income,” says Julia O’Brien, an associate researcher for GOBankingRates. “While 43.91% of women reported an annual income below $30,000, only 30.27% of men reported an income that low.”
In addition, the $0-$300 in savings bracket has the highest percentage in the oldest age groups, as the 55-64 age group reports with 54.9%, compared to 24.8% for the 18-24 age group.
Another key finding of the survey includes the fact that 63% of Americans say their personal finances were affected by the COVID-19 pandemic. The 25-34 age group was the most affected at a staggering 75%, followed by the 35-44 age group at 67% and the 45-54 age group at 63.9 %.
Also because of the pandemic, 55% of Americans had to dip into their savings, with the 25 to 34 age group being the most affected, at 64.3%. In addition, 12.6% of respondents said they had no savings to begin with.
The number of Americans living paycheck-to-paycheck has increased, as well, with 37.5% compared with 33% in December 2019. Other obstacles keeping Americans from saving money include being unemployed (25.8% compared to 22.8% in 2019); the cost of living (24.45% compared to 19.7% in 2019); and having too much debt (17% compared to 16% in 2019.)
Another survey question was how respondents would use an additional $1,400 stimulus check. A large percentage of Americans, 40%, say they would use it to pay their bills and rent. Another 20.5% say they would use it to pay for other necessities, such as food and healthcare and 14% would use it to pay off debt. The over-65 age group took the lion’s share of saying they would use it to pay off debt, at 23.5%.
More From GOBankingRates:
- Biden Wants to Shut Down Credit Bureaus – What Would That Mean for You?
- 36 Ways To Save For Your Emergency Fund and Any Unexpected Situations
- Top 100 Banks Leading the U.S. in 2021
- 35 Ways To Slash Your Car Costs
This survey of 1,000 respondents across America was conducted in January 2021.