Pew study: Americans think they’re not saving enough money

Verle Brown is in rare company. She’s one of few Americans who is comfortable with what’s in her savings account.

A recent Pew Research Center study showed three of every four Americans say they aren’t saving enough. The study, which surveyed 2,413 adults by telephone, concluded that this overall feeling is felt by almost everyone.

Americans said they aren’t too concerned about their savings – or lack thereof. They now save, on average, less than 1 percent of their incomes, according to the Pew Research Center.

This trend has actually been ongoing for longer than the past two decades, but people are now starting to ask what they can do to stop this downward spiral.

“I think, over the last year-and-a-half as things have tightened up, I think now their focus is beginning to change to, ‘Hey, maybe we ought to have a little nest egg set aside,’ ” UMB Bank Community Bank President Craig McGonagle said. “The cost of everything has gone up, so their spending habits have had to change, and they don’t have that buffer that they used to have. So I think that people are starting to put more thought to their purchases and how they’re spending their money.”

Seventy-four percent of women responding to the survey said they weren’t saving enough, and the survey showed few differences among people of different ages or races.

Angela Gay, 27, said she is one who doesn’t feel comfortable with what she’s saving. Although she does have a savings account, Gay said it was tough for her and her husband, David, to continually add to the account when they have a child.

Brown, 74, said her secret to success didn’t involve anything special. In fact, the key was never seeing her savings money. She followed one of the recommendations others can find on the Missouri Saves Web site by making savings a fixed expense.

Experts say to plan to deduct a certain amount – no matter how small – from your paycheck instead of waiting to throw whatever cash is leftover into savings.

Gay pointed out that certain credit cards offer “save the change” options that automatically round up purchases to the next dollar and deposit the extra change into a savings account, which is another way people can start saving without really noticing a difference.

Brown said she first started a savings account when she started working at JC Penny’s in the 1970s, which allowed her to deduct money from her check for stock in the company.

“That was my first experience with saving, and I thought that was pretty smart,” said Brown, who already had four children at the time. “I think that was one of the good things that I did because it didn’t hurt me.”

With the option of automatic payments available at most workplaces, tucking some money away into savings should be easier than ever. Missouri Credit Union President/CEO Hal James said it’s critical for an employee to deduct money from every paycheck for savings.

“It doesn’t matter how much anyone makes, they need to save something,” James said. “Payroll deduction has always been easy. If you don’t see it, you don’t miss it – that’s the key.”

Brown agrees, saying that she thinks she would have spent the money that automatically went into her savings account if it had come to her first. By automatically having some money deducted from every paycheck, Brown said she was able to start saving without it impacting her daily life.

“I don’t think it made a difference at all,” she said. “You just kind of worked with what you had. …. We got accustomed to where you knew, approximately, what you were going to have to work with. So you just did that and it was very easy for us.”

Gay said most of the money in her families’ savings has come from large lump-sum checks – like their tax returns.

“That just goes into savings because basically it’s money that we didn’t have to begin with or we’ve already paid through,” she said. “It’s done in our minds, so if we get it, it just goes into that account and then it’s socked away.”

For someone who hasn’t saved before, James said he recommends starting with a simple amount like $10 per paycheck. Although it doesn’t sound like a lot of money, James says that kind of money adds up to an amount that everyone needs. James said that amount varies from person to person, but he thinks everyone should at least have $500 to $2,000 in an account to cover emergencies.

“If you can do that, you’re going to be able to cover those catastrophes that come up, like a flat tire, or a broken heater, or a broken washer, or something bigger with your car, or something bigger with your house or even something that happens to you,” James said. “You’ve got to have a cushion to cover those events.”

He added that people who don’t have enough money to cover these types of emergencies end up paying a lot more in the end because they have to go into debt to fix the problem – and typically that type of debt carries a high interest rate.

Once an emergency fund is established, James said the next goal should be to get out of debt.

To do that and start building savings, bankers and the Missouri Saves Web site say a person must build a budget – a task that seems more daunting than it really is.

“It’s based on what you spend anyway,” Gay said. “You just have to sit down and think about what your bills are each month, or what they could be on average at least, and then stick to it. It’s not hard to stick to because it’s based on how we spend anyway.”

By building a budget, a person can figure out what money they’re bringing in and how much goes back out. That person can also determine what can be cut from the budget to help save more. Determining the difference between wants and needs is critical in this stage.

James said having a budget is essential to saving money.

“That’s the only way to do it,” James said. “If you don’t have a plan, you can’t do anything. So you’ve got to have an outline of what you think you’ve got and where you’re trying to get to. Everybody needs some kind of plan.”

McGonagle said he thinks around half of those who bank at UMB have some sort of savings account (either money market, savings or CD) along with his or her checking account.

McGonagle said he’s hopeful that number will increase as people continue to be more protective of their money. He pointed out that the sooner a person starts to build savings toward long-term goals, the easier it will be to reach those goals.

“People have grandiose ideas of what their goals are, and it just seems like you can never get there, but you just have to start with something small,” Gay said. “Instead of buying that item of clothing or extra Happy Meal, just put that aside.”