June 12th, 2019 | Updated on June 20th, 2020
An incredible 21 percent of Americans have nothing saved at all, according to the recent survey from Bankrate.com.
In the UAE, 85 percent are not saving either, which is a stark contrast to India’s culture of saving. At first glance, this statistic evokes the thought that Americans are struggling to make ends meet, and while some of them are living paycheck to paycheck, there is a lot more to the lack of money in their savings accounts.
Shockingly, the concept of saving and its tools remain a mystery to some, and although Americans can do a lot more to make saving a reality, some of them are actually choosing not to, which leaves them vulnerable when they need money in an emergency.
1. The Ripple Effect Of Consumers Choosing Not To Save
The lack of savings not only affects the present state of Americans, but it is also influencing their future and in a big way.
Interestingly, what should be noted from the most recent figures is that not only are a lot of them not saving at all, but it is not a priority for a large percentage of the population.
A part of this stems from the culture of credit that has been cultivated in recent decades and continues to run rampant in today’s society, not just in America, but across the globe.
As a result, economies such as the United States of America, Denmark, and the United Kingdom find themselves carrying staggering amounts of household debt.
With this comes the continuing effects on not only consumers’ short term goals such as building their savings, but also longer-term goals such as retirement and securing their own home.
Their mental state is also being affected; 25 percent of Americans worry about money all the time, and finances are one of the top stressors amongst consumers.
They remain extremely vulnerable, thanks to an increasing percentage of the population not even having emergency savings to cover a $400 bill, and a large part of the reason is that they remain short-sighted and largely uninformed when it comes to banking and saving.
2. The Lack Of Understanding Basic Concepts
In a first world economy such as America, a majority of consumers have bank accounts and the ease of access to open one (or several).
More recently, the rise of digital and challenger banks has made the process even easier to access an account to encourage them to save.
However, over 33 percent of them have no idea about which account gives them the highest interest rate and reward for their savings. This is particularly prevalent amongst those aged 55-64 years old, the age group for which retirement is imminent.
To begin saving and get the best out of your savings, you must first understand basic concepts, such as interest rates.
Becoming familiar with the ways to build your personal savings and the best options out there is the beginning of a successful saving habit. Being aware of the basics can also help you with choosing the best way to grow your savings, such as by investing in higher rate secure investment options, including term deposits and bonds.
This is an area where Indian consumers continue to show their weakness. Although they embrace the culture of saving, they continue to be unaware or wary of the ways they can make their savings work for them.
3. Access To Information Is Widespread – Make Use Of It
Thanks to globalization and the internet, information has never been more available to consumers. It is also a large part of the answer when it comes to breaking the misunderstanding barrier in personal finance.
Improved financial knowledge brings with it informed decision making. Whether it is through your local banking branch, local community center or at home accessing the financial resources online, it is time to start utilizing the available information on personal finance.
If you look closely enough, all the tools to begin saving are freely available, and so is the information to get you started, such as budgeting methods, debt repayment tips, or even automatic saving pots offered by banks that round up purchases.
4. Make Budgeting Compulsory
A part of the problem is also that consumers are not making the habits needed to save a part of their lives.
Although the usefulness of budgeting has been widespread in recent years and by many financial experts, it is still being viewed as an optional aspect when it comes to managing personal finance.
Budgeting not only helps with the cutting of costs, but it also helps consumers remain accountable for their spending habits. It does not have to be difficult either.
Start with tracking your expenses and income. This will give you an overall view of where you stand each month. If you note that your entire income is being spent each month, it is time to start looking at cutting expenses. When in doubt, consider what is necessary, and use that as your guide.
Before the lack of savings question can be answered, the consumers must be armed with the right tools and accurate information. Only then can they be expected to make the best decisions when it comes to their personal finances.