The Federal Reserve released a sobering Report on the Economic Well-Being of U.S. Households in 2017 that should raise questions about savings. It found that about 40% of adults in 2017 did not have enough liquid funds to cover a $400 emergency expense.
Here’s a deeper look at this startling comprehensive survey of 12,000 Americans:
Perceptions of Financial Security
Despite the report’s findings, 74% of the individuals surveyed said they were either doing okay or living comfortably in 2017. That confidence level is ten points higher than the Federal Reserve’s 2013 survey.
While the overall economy still appears to be improving, U.S. households must still deal with debt from credit cards and student loans. Consumer debt, according to LendingTree, is headed for $4 billion this year. About 40% of respondents said that if they had to pay for a $400 expense, they would need to sell items, borrow the money or take payday loans.
Among adults still in the workforce, less than 40% believe they are comfortable with saving for retirement, while a quarter have no retirement plan at all.
Related Article: 10 Crucial Tips to Build Your Emergency Fund
Steps Toward Savings
Part of the problem with savings is timing. Many times people owe money before their paycheck arrives. These people should consider automating direct deposit and payroll deductions. Americans who lack savings should also learn to operate on a tighter budget.
The goal of building savings for an emergency expense creates a safety net for you and your family, instead of living in anxiety. One of the most vulnerable age groups is young people under the age of 30, in which 25% receive financial support from outside the household.
The keys to achieving savings even on a tight budget revolve around cutting entertainment expenses and eating out. Reducing energy bills through conservation and preparing your own meals will help lead to savings.