What are you saving for? GOBankingRates posed this question to over 5,000 Americans for its fourth annual savings survey. The answer most people chose might come as a surprise, and could reflect a change in how people are defining the “American dream.”
Respondents were asked to choose from one of five choices: retirement, home, car, college and child/family-related expenses.
Personally, I’m saving for retirement. As I get older retirement is coming closer, and it’s really important to me that I’m debt-free and have enough money to cover health expenses when I retire. Time catches up with us all, and if I don’t prepare and listen to what so many personal finance experts are saying, I could be in a very scary situation when I’m 65 — find out what Americans are saving their money for.
29% of Americans Are Primarily Saving for Retirement
The majority of respondents — nearly a third — said that they are primarily saving for retirement.
How much you need to have saved to retire will be based on a number of factors, including where you live. To calculate how much you need to save, figure out your total retirement income and subtract how much you will need to spend to cover living expenses.
Baby Boomers Are the Most Focused on Saving for Retirement
Those on the cusp of retirement — ages 55 to 64 — are the most focused on saving for retirement, with 51 percent choosing this as their primary savings goal. Those who are already retirement age — ages 65 and older — are also focused on padding their retirement savings, with 49 percent choosing this as their primary goal. However, many Americans will still retire broke.
Men Are More Focused on Saving for Retirement Than Women
The majority of men — 32 percent — said that retirement is their primary savings goal, while only 26 percent of women chose this option. More women (30 percent) said that saving for a home is their primary savings goal. But, people of both genders might not be saving enough due to a number of obstacles.
Why People Are Saving for Retirement
David Kilby, president of the national financial wellness and employee benefit platform FinFit and a former senior-level employee at KPMG, believes many people are saving for retirement because it has become a talked-about topic, and there are also more tools available now to understand how much needs to be saved.
“There has been much discussion in the marketplace on financial wellness and retirement planning,” Kilby said. “I believe these discussions are creating awareness for people to take an active role in assessing their financial position and defining appropriate activities to meet their goals. I also believe the technologies and advancements in data availability and processing are allowing a much greater populous of people to easily and accurately understand where they are, and where they will be at retirement based on current savings and earnings behaviors.”
Is Saving for Retirement the Best Choice?
It’s important to focus on long-term savings goals like retirement, instead of just focusing on short-term wants like a house, car or vacation, said Jason Thacker, head of consumer deposits and payments at TD Bank.
“It’s always harder to think about the long-term implications of retirement savings because it’s easier to focus on the immediate satisfaction of a near-term event versus a longer-term purchase like saving for a home,” he said. “But it’s important everyone thinks about their future now when they are working, to save for retirement later when they don’t want to be. Taking a portion of each paycheck and putting it directly into retirement savings is an important discipline for all of us.”
27% of Americans Are Saving for a Home
Buying a home is the No. 2 reason Americans are saving their money. Millennials aged 25 to 34 are the most likely to be saving for a home, with 43 percent choosing this as their primary savings goal. Older millennials and younger Gen Xers (ages 35 to 44) are close behind with 36 percent choosing this as their primary savings goal. Even though millennials are the most likely to be saving for a home, they no longer define the American dream as homeownership.
How Much You Should Save If Buying a Home Is Your Goal
Saving is one of the essential steps to buying a home. In addition to saving at least 3.5 percent for a down payment on an FHA loan, save an additional 3 percent for closing costs, Herndon Davis, residential mortgage loan originator and real estate agent at Mortgage Real Estate Services, previously told GOBankingRates.
You should also have enough savings to cover additional costs, such as inspections, appraisals and moving fees, said Rae Dolan, a professionally licensed real estate specialist at BuyingKaty.com.
20% of Americans Are Saving for Vacation
A fifth of those surveyed said their primary savings goal is a vacation. The 35-to-44 age group was most likely to choose this as their primary savings goal, and women are more likely to be saving for a vacation than men. Overall, the amount Americans have saved varies by state.
How to Save on Your Next Vacation
You don’t need to spend a lot of money on travel, even if you’re planning a luxury vacation. Some of the best ways to save on your next trip are to stay at a condo or rental property instead of a hotel or resort, choosing your destination wisely, traveling at off-peak times and making use of credit card rewards.
20% of Americans Are Saving for a Car
The percentage of respondents who are primarily saving for a car is the same as the percentage who are primarily saving for a vacation. The 18-to-24 age group is the most likely to be saving up for a car, with 29 percent selecting this option. The percentage of males and females saving for a car is pretty even, with 20 percent of males choosing this as their primary goal and 21 percent of females selecting this choice.
Saving up for car expenses is a good idea, as these costs are one of the most common reasons Americans tap into their emergency funds.
How Much You Should Save If Buying a Car Is Your Goal
The amount of money you will need to save to buy a car will depend on the price of the car, of course, but also how you plan to pay for it. Shop around for car loan options, and also make sure you will have enough money to pay for car insurance.
14% of Americans Are Saving for College
The majority of respondents who said they are saving for college are college-aged: 47 percent of those who chose this answer are ages 18 to 24. This seems to indicate that most college students are funding their own education, rather than relying on funds from parents.
How Much You Should Save If Paying for College Is Your Goal
If you want to pay for college without taking out loans, you’ll have to have a pretty large amount saved. The average cost of tuition and fees for the 2018-19 school year was $35,676 at private colleges, and $9,716 for state residents and $21,629 for out-of-state students at public colleges, according to U.S. News & World Report.
13% of Americans Are Saving for Child and Family-Related Expenses
Only a minority of savers subscribe to a “family-first” mentality — although it could be argued that saving for a car or home might benefit a family. Millennials are the most likely age group to be saving for these expenses, probably because ages 25 to 44 are in the time frame that many choose to start a family.
According to a recent TD Bank survey, the greatest financial fear among millennials is not being able to provide for their family.
How Much You Should Save If You Want to Start a Family
The amount of money it takes to raise a child might shock you, so it’s a good idea to start saving now if you’re planning to start a family anytime soon. According to the U.S. Department of Agriculture, it will cost an estimated $233,610 to raise a child born in 2015 over the course of their life.
My Tips for Saving More for Retirement
If you’re like me, even if your priority is saving for retirement, you might not be happy with how much you have saved. However, there are steps I am taking to catch up to where I want to be:
- I’m currently working on paying off all my debt including my home, so I can put more money in my savings every month.
- I’m reading books, listening to podcasts and taking advice from advisors from many different companies to find out what the best strategy is for me.
Gabrielle Olya contributed to the reporting for this article.
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About the Author
With eight years of experience working in the personal finance space at GOBankingRates, Jaime Catmull has amassed an extensive network of financial influencers and experts. Now, she’s tapping that network to get the real scoop on how you can live your best financial life and increase your wealth.