How Much Money Does The Average Person Save In The US?

How Much Money Does the Average Person Save in the US?

When it comes to personal finance in the US, one question many of us ask is: how much money does the average person save? Whether you're trying to save for a house, pay off student loans, or build an emergency fund, understanding how much Americans are saving can help you put your own savings into perspective. In this article, we'll explore the savings habits of Americans, break down statistics by age group, and compare the numbers over the years. Let’s dive into the world of finance in the US and see just how much people are really putting away.

Key Statistics About Savings in the US

Before we delve into age group specifics, let’s first look at some broad statistics that paint a picture of savings in the US. In recent years, various studies and surveys have aimed to answer this burning question: how much money does the average person save in the US?

- According to the Federal Reserve (2023), the median savings for American households is $5,300.

- A 2021 survey by Bankrate revealed that only 39% of Americans have enough savings to cover an unexpected $1,000 emergency.

- A report by USA Today in 2022 found that 60% of Americans had less than $1,000 in savings.

These figures paint a concerning picture. Despite being one of the wealthiest nations in the world, a significant portion of Americans have limited savings to fall back on.

Breaking Down Savings by Age Group

Savings habits can vary drastically based on one’s age, income, and life stage. Understanding how different age groups save (or don’t save) can provide valuable insights. Let’s break down how savings differ across various age brackets.

1. Generation Z (Ages 18–24)

- Average Savings: On average, people in this age group save about $2,000 to $3,000.

- Savings Behavior: The Gen Z crowd tends to be more conservative in their spending habits but may struggle to save due to student loan debt and entry-level salaries. Many are still in school or just starting their careers, making it harder to accumulate large savings.

- Key Statistic: According to Bankrate, 31% of Gen Zers have no savings at all, while others focus on building emergency funds or contributing to savings apps and investment accounts.

While savings rates are lower compared to older generations, Gen Z is growing increasingly aware of the importance of financial literacy and saving for long-term goals.

2. Millennials (Ages 25–40)

- Average Savings: Millennials have an average of $8,000 to $10,000 saved, though the median savings is lower.

- Savings Behavior: As Millennials enter their prime earning years, many face unique financial pressures, including student debt, mortgages, and raising families. However, they tend to be more tech-savvy and are keen on using financial tools like budgeting apps, high-yield savings accounts, and investing platforms.

- Key Statistic: A 2022 study by the National Institute on Retirement Security found that Millennials have saved an average of $20,000 for retirement. While this is higher than some older generations at similar ages, it is still far below what experts recommend for retirement savings.

Millennials are often trying to balance long-term goals with short-term financial needs, leading to a complicated savings picture. This age group is also more likely to invest, particularly in the stock market and real estate, but many still struggle to save consistently.

3. Generation X (Ages 41–56)

- Average Savings: Generation X typically has $25,000 to $50,000 saved up, depending on their household income and financial situation.

- Savings Behavior: Gen X is generally in their peak earning years, and many are focused on paying off mortgages, funding their children's college education, and contributing to retirement savings. However, they often face the challenge of caring for aging parents, which can impact their ability to save more.

- Key Statistic: According to a 2023 survey by the Employee Benefit Research Institute (EBRI), the average retirement savings for Generation X was about $70,000. While this might seem like a solid amount, experts suggest that a retirement nest egg of closer to $1 million would be ideal.

While Generation X has more savings than younger generations, many are still behind in saving for retirement, and the cost of living continues to put pressure on their ability to save.

4. Baby Boomers (Ages 57–75)

- Average Savings: Baby Boomers tend to have $100,000 to $250,000 saved, though this varies widely based on lifestyle, income, and whether they’ve planned well for retirement.

- Savings Behavior: As Baby Boomers approach retirement or have already retired, their savings patterns often reflect a desire for stability. Many have fully paid-off homes, but their savings focus is on retirement accounts like 401(k)s and IRAs.

- Key Statistic: According to a 2022 study by Fidelity, Baby Boomers have an average of $150,000 saved for retirement, but experts say this isn’t enough for a comfortable retirement, as the average monthly retirement expenses can exceed $3,000.

Despite having more savings overall, Baby Boomers are dealing with the challenge of ensuring their savings last through retirement. For many, a lack of financial planning in their earlier years leads to a scramble in later life to accumulate more savings.

5. Silent Generation (Ages 76 and Older)

- Average Savings: For those in the Silent Generation, savings can vary significantly, but many have between $50,000 and $100,000 saved, with some having even less.

- Savings Behavior: As many of this generation are already retired, their savings are often drawn from fixed incomes, pensions, and Social Security benefits. They also rely on healthcare benefits and support from family members in some cases.

- Key Statistic: A 2022 survey by the National Council on Aging found that nearly half of people 65+ have less than $25,000 saved for retirement, which is well below the amount needed for most retirees.

While savings are more limited in the Silent Generation, those with more substantial savings are often relying on Social Security and other fixed-income sources, with little room for savings growth.

How Much Money Does the Average Person Save in the US Over Time?

When comparing savings rates across generations, it’s important to note how savings trends have shifted over the years. Historically, Americans saved more than they do now, but several factors have contributed to a decrease in savings rates in recent decades.

- The Great Recession (2007–2009): This economic downturn caused many Americans to dip into their savings and home equity. By the time recovery began, many households had to rebuild their savings from scratch.

- The COVID-19 Pandemic (2020–2021): Interestingly, during the pandemic, many Americans saved more money due to reduced spending (because of lockdowns and travel restrictions) and government stimulus payments. By 2021, savings rates spiked to 33.7%—the highest level in decades—before settling back down.

- Pre-COVID Trends: According to the U.S. Bureau of Economic Analysis, the personal savings rate in the US had been hovering around 7–8% for the last two decades before the pandemic. However, this rate is still below what is typically recommended for long-term financial stability.

The Declining Savings Rate

Over the years, Americans have been saving less and less. In the 1970s, the personal savings rate was around 12-13%, but it has steadily decreased, hitting an all-time low of around 2.4% in 2005. The decline can be attributed to a variety of factors, including:

- Rising cost of living: Healthcare, education, and housing costs have all increased significantly, leaving less disposable income for savings.

- Consumer culture: The rise of consumer credit and a “buy now, pay later” mentality has led many Americans to prioritize spending over saving.

- Low-interest rates: Historically low-interest rates for much of the last decade have reduced the incentive to save in traditional savings accounts.

Social and Cultural Factors Impacting Savings

Finally, social and cultural factors play a role in how much money the average person saves in the US. The culture of consumerism prevalent in American society often encourages spending over saving. The rise of social media influencers and advertising has created an environment where lifestyle choices, such as luxury goods, vacations, and dining out, are often perceived as necessary for social status. This can make it harder for individuals, particularly younger generations, to prioritize saving over instant gratification.

Additionally, many Americans face peer pressure when it comes to spending on status symbols, like cars, clothes, or gadgets. This is exacerbated by easy credit access, where people are encouraged to spend money they don’t have. In contrast, cultures that place a higher value on frugality and long-term financial planning tend to see better savings rates. However, some financial experts argue that while living below your means is important, it’s equally essential to maintain a balance between enjoying life today and saving for the future. Striking this balance can help individuals maintain financial stability while still being able to enjoy their current lifestyle.

The Effect of Debt on Savings

Debt plays a significant role in how much people can save. Student loan debt, credit card debt, and mortgage obligations are major financial burdens that prevent many individuals from saving as much as they would like. For instance, student loan debt in the US reached over $1.7 trillion in 2023, and the average borrower owes more than $30,000. This burden particularly affects younger individuals who are trying to get a foot on the property ladder or save for retirement. Similarly, credit card debt can compound quickly due to high-interest rates, further eroding the ability to save. To enhance your finances and ensure you are utilising every opportunity possible read our article on Balance Transfer cards so you can gain some knowledge on how to tackle debt faster.

The financial strain caused by debt often leads to people making only the minimum payments, which results in interest compounding and overall debt levels rising. This becomes a vicious cycle where individuals are paying off debt instead of building savings. Many financial experts recommend using the debt snowball or debt avalanche method to eliminate high-interest debt first, thereby freeing up more disposable income to save and invest for the future. Reducing debt allows individuals to build savings more effectively, helping them achieve financial stability faster. For Further information on how many Credit Cards you should own read our sister article.

The Role of Financial Literacy in Savings Behaviour

Another crucial factor that affects how much money the average person saves in the US is financial literacy. Studies consistently show that those with a better understanding of finance tend to save more effectively. A 2022 report from the National Financial Educators Council revealed that about 70% of Americans lack the financial knowledge necessary to make informed decisions regarding saving, investing, and managing debt. Without a solid understanding of concepts like compound interest, budgeting, and investment strategies, many Americans miss out on opportunities to maximize their savings potential.

Financial education is particularly important for younger generations, who are more likely to benefit from compound growth in their savings over time. Teaching financial literacy from a young age could drastically shift the savings habits of future generations. Programs that teach the basics of budgeting, saving, investing, and understanding credit could empower Americans to make smarter financial decisions, ultimately increasing national savings rates in the long run.

How Investments Can Boost Your Savings

While traditional savings accounts are important, one of the best ways to grow wealth over time is through investments. The stock market, real estate, and retirement accounts like 401(k)s or IRAs allow individuals to build wealth much more rapidly than through savings alone. Historically, the S&P 500 has returned an average of 7–10% per year over the long term, making it a powerful tool for increasing savings.

For younger people, investing early can have a significant impact due to the power of compound interest. Even small investments made in your 20s and 30s can grow into a large sum by the time you're ready for retirement. However, it’s crucial to understand the risks associated with investing. While investments like stocks have the potential for higher returns, they also come with the risk of loss. Therefore, it’s important to educate oneself on risk management, diversification, and setting realistic investment goals. For those unsure about where to start, consulting a financial advisor or using advisors could be a great way to build a personalised investment strategy.

What Can You Do to Improve Your Savings?

While the national average might paint a grim picture, the good news is that you have the power to increase your savings regardless of where you stand today. Here are some tips to improve your savings:

- Set Clear Goals: Whether you’re saving for a down payment on a house, retirement, or an emergency fund, setting clear and specific savings goals can help you stay motivated and on track.

- Automate Your Savings: Set up automatic transfers to your savings or investment accounts. This way, you’ll pay yourself first and make saving a priority.

- Cut Back on Unnecessary Spending: Take a hard look at your expenses and identify areas where you can cut back—whether that’s reducing subscription services or cooking at home more often.

- Increase Your Income: Look for ways to boost your income, whether it’s through a side hustle, investing in skills training, or seeking a higher-paying job.

Conclusion

In conclusion, the average savings rate in the US varies widely by age group, but overall, Americans are not saving enough. For younger generations like Gen Z and Millennials, building up savings can feel like an uphill battle, while older generations are working hard to prepare for retirement. Regardless of age, it's clear that many Americans need to prioritize savings more in order to achieve financial security.

By understanding the trends in finance in the US, you can take proactive steps to improve your own savings rate, whether that’s by budgeting better, reducing debt, or making more strategic investments. In this article we covered the average savings for the US but make sure to check out our article on Average savings in the UK to see how overseas figures can change dramatically No matter your age, it’s never too late to start saving for a better financial future!