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Over Half of Americans Are Missing Out on Free Money — Are You One of Them?

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alfexe / Getty Images/iStockphoto

If you were handed the opportunity to earn free money, wouldn’t you take it? Most Americans would answer with an emphatic “yes.” Yet more than half of Americans are doing the opposite by not taking advantage of easy ways to earn more money.

GOBankingRates partnered with Comenity Direct to find out how Americans are handling their money and if they’re making the most of their savings. Specifically, GOBankingRates surveyed 1,001 Americans in mid-September to determine how respondents’ banking behaviors have changed since the start of the year as the country deals with a pandemic.

The survey results show that while some Americans have been forced to dip into their savings, many have not changed their savings strategy at all. If you count yourself among the roughly 82% of Americans in the survey who are not increasing their savings, you may be missing an opportunity to be better prepared for the next financial crisis.

Let’s look at how Americans are responding to the pandemic in terms of savings. After that, you’ll find suggestions about how you can improve your financial position going forward.

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Reasons Americans Were Saving Before 2020

Numerous studies have suggested that Americans aren’t making enough effort to save money, and the results of this survey are no different. Just over 40% of respondents indicated that before 2020 they weren’t saving for anything at all.

Of those who were saving for something in particular, a general emergency fund was by far the top priority, selected by over 24% of respondents. The response rate for other goals, ranging from buying a house or car to renovating a home or saving for college, was between about 10% and 13%.

Before 2020, what were you saving for? (select all that apply) Response Rate
Unexpected emergencies (e.g., medical, car repairs, etc.) 24.38%
A special event (e.g., vacation, wedding, etc.) 12.99%
Buying a car 12.59%
Schooling/College 11.39%
Renovating my home 11.39%
Buying a house 11.09%
To help family/children/grandchildren 9.99%
I wasn’t saving for anything. 40.56%

 

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How Americans Are Saving Differently Now

The coronavirus pandemic of 2020 has brought about changes in how Americans save. Thanks to rising unemployment and overall economic uncertainty, it’s unsurprising that almost 20% of respondents indicated they are saving less in 2020 than they were in 2019. Over 12% noted that they had to unexpectedly withdraw some of their savings.

How are you handling your savings differently now since the start of the year? (select one) Response Rate
I am saving less money now. 19.98%
I’ve had to unexpectedly withdraw money from my savings. 12.39%
I am saving more than I planned at the start of 2020. 11.39%
I’m saving more and plan to increase my savings soon. 6.29%
I’m still saving but for something else. 6.19%
I have not made any changes to my savings. 43.76%

Despite the financial crisis the pandemic has caused for many people, nearly 44% of respondents indicated they have not changed their savings strategy at all. This means that even with all the concerns people are facing, many Americans are still not increasing their savings when they really may need extra money to fall back on in the near future.

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Americans Are Missing Out on Doing More With Their Money

With over 40% of Americans in the survey indicating they weren’t saving for anything before 2020, it’s clear that many are missing out on the chance to earn interest on savings. They are essentially passing up free money. What’s more, even many of those who are saving aren’t maximizing their return. A whopping 57% of respondents indicated that they are saving in checking accounts instead of higher-yielding options like CDs, money market accounts or savings accounts.

What banking products are you using for your savings now? (select all that apply) Response Rate
A checking account 57.04%
A savings account/high-yield savings account 41.36%
A money market account 14.19%
A CD 8.19%
Other 11.59%

Regardless of the type of investment you choose, the point is there are plenty of better options beyond a checking account that can earn you additional interest on your savings.

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What Americans Are Saving For Now

For those Americans who are saving, their goals are similar to those from 2019. Although the single largest category for savings in the survey is “none of the above,” it’s followed closely by “unexpected emergencies” at 28.37%.

Meanwhile, despite the financial struggles many Americans are facing right now, the survey results showed that people are still saving for big life events like buying a house or car, special events like a wedding and college costs.

What are you saving for now? (select all that apply) Response Rate
Unexpected emergencies (e.g., medical, car repairs, etc.) 28.37%
Schooling/College 12.39%
Buying a car 12.29%
Renovating my home 11.59%
A special event (e.g., vacation, wedding, etc.) 11.49%
Buying a house 11.09%
To help family/children/grandchildren 9.29%
None of the above 36.16%

Use These: Tips To Keep Your Finances in Order Without Sacrificing What You Want

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What Americans Would Do With Extra Money

Earlier in the year, many Americans received a stimulus check. At the time of this survey, there were ongoing discussions in Washington about the passage of a second stimulus bill, with additional direct payments of $1,200 per American being considered. In encouraging news, 36.96% of survey respondents indicated they would save any additional money they would receive. That was by far the most popular response, ranking significantly ahead of the 20.38% who indicated they would pay bills and the 17.48% who would choose to pay down debt.

If you were given extra money right now (e.g., a second stimulus check) what would you do with it? (select one) Response Rate
Save it 36.96%
Pay bills 20.38%
Pay down debt 17.48%
Spend it on groceries and/or other essentials 12.39%
Spend it on something nonessential (e.g., travel) 6.79%
Help children/grandchildren/family members 5.99%
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How You Can Make the Most of Your Money

The way to make the most of your money is to put it to work until you need it. Although you may not want to put emergency funds or money you’ll need in the near term in places like the stock market since it may be riskier and is not FDIC insured, there are plenty of options that can earn a decent return until you need to access those funds. One option to grow money you might need soon include high-yield savings accounts and certain types of CDs, both of which can offer security while typically paying higher interest rates.

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High-Yield Savings Accounts

A high-yield savings account can be a great option as a place to store your emergency or goal-oriented funds. The two main benefits that high-yield savings accounts offer are high interest rates and access to your funds.

According to the survey, Americans are interested in numerous banking features in addition to high yields. Good customer service, low fees, ease of use and account security are also important characteristics.

 

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Certificates of Deposit (CDs)

Certificates of deposit can be another great savings option if you’re looking to earn more money than you would with a checking account. Like high-yield savings accounts, CDs typically have no monthly fees and offer higher interest rates.

Most banks offer a range of terms for CDs, which allows for a strategy known as a ladder. With a ladder, you can spread your money out over different maturities, and as each CD matures, you reinvest the funds at the end of the ladder.

If you choose to put your savings into CDs, you should be aware that they are generally less liquid than savings or checking accounts. Most banks charge early withdrawal penalties if you take money out before a CD matures, so you’ll have to be sure you won’t need your money before that time.

Overall, however, CDs generally pay as most do not pay interest. If you can tailor your CD maturity schedule to meet your financial needs, you may be able to pocket more interest.

More From GOBankingRates

Methodology: GOBankingRates surveyed 1,001 Americans ages 18 and older from across the country between Sept. 16 and Sept. 17, 2020, asking six different questions: (1) Before 2020, what were you saving for?; (2) What banking products are you using for your savings now?; (3) If you were given extra money right now (e.g., a second stimulus check) what would you do with it?; (4) What are you saving for now?; (5) How are you handling your savings differently now since the start of the year?; and (6) Beyond interest rate, what is the No. 1 feature you look for in a savings account? GOBankingRates used Survata’s survey platform to conduct the poll.

 

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