A new report from the Center for Financial Services Innovation says that only 28% of Americans are financially healthy. And it reinforces something we already knew: The U.S. saving rate sucks. Americans don't save.
The U.S. Financial Health Pulse divides people into three tiers of financial health.
- Financially healthy people (28% of the U.S., 70 million people) are “spending saving, borrowing, and planning in a way that will allow them to be resilient and pursue opportunities over time.”
- Financially coping people (55%, 138 million) are “struggling with some, but not necessarily all, aspects of their financial lives.”
- Financially vulnerable people (17%, 42 million) are “struggling with all, or nearly all, aspects of their financial lives.”
The full report is huge — it's an 80-page PDF! — and filled with data based on survey responses from 5000 people. The document does a great job of presenting the info, separating it into four major sections (spend, save, borrow, plan), then comparing how people in each financial health tier differ in their approaches.
Here, for instance, are the results for the survey question about saving rate:
In the nearly thirteen years I've been writing Get Rich Slowly, I've seen reports like this over and over and over again. It's a constant refrain: American's don't save. But why don't they save?
The U.S. Saving Rate
There's a tendency in some circles to blame outside forces for our national inability to save. “People can't save because the economy sucks. Incomes are low and expenses are high.”
I'm not going to say that stagnating wages don't play a part in the problem, but I dont think they're a primary factor. In fact, if you look at a chart of the U.S. saving rate over time, you can see a surprising pattern. (This data comes from the Federal Reserve and the U.S. Bureau of Economic Analysis.)
See those grey shaded areas in the chart above? Those are recessions. When the economy is bad, people tend to save more. When the economy is booming — the mid 1980s, the late 1990s, the mid 2000s, now — people save less. This takes the teeth out of the whole “people can't save because of the economy” argument.
I think the problem with the American saving rate is complex. There are many forces working together to depress saving rates in this country. [Read more…]