CEO and Founder of Plinqitthe only savings app of its kind that pays users to learn about finance and savings.
From the pandemic to inflation, today’s consumers have recently faced several economic challenges. With inflated prices for basic necessities, including groceries, gas and rent, Americans have been forced to balance earning a living and building up their savings, and prioritizing their other goals. financial.
So why are Americans saving and where do their financial priorities lie? Perhaps the most important question is: what are banks doing to help their customers pursue and achieve their financial goals despite these challenges?
The good news is that most consumers recognize the importance of saving money, and Plinqit’s State of Savings report proves it, as 91% of respondents said they save at least some money. Given the economic uncertainty of the past few years, Americans are worried about how they will use their next paycheck. According to a Mint poll, 21% of consumers surveyed have increased their savings in the wake of the pandemic.
So why are Americans saving?
One of the main categories of savings this year was debt repayment. The State of Savings Report reveals that nearly half of Americans, 42%, are putting money aside to pay down debt. Given the recent economic climate that has pushed many Americans into more debt to make ends meet, and the Fed’s interest rate hikes that have made borrowing more expensive, it’s no surprise that the debt repayment is a top priority for consumers.
However, this “savings” category should be distinguished from the others, because repaying a debt is not the same as contributing to a savings account or saving money for retirement. Many consumers balance debt while building savings and pursuing other financial goals.
Nearly half of Americans are putting money aside for an emergency fund
Financial experts have always advised consumers to prioritize an emergency fund as a buffer to pay for large, unexpected expenses, such as medical bills, home repairs, or even job loss. Conventional wisdom recommends setting aside six to twelve months of savings, enough to cover living expenses. Consumers are taking this advice to heart, as Plinqit’s State of Savings report reveals that saving for an emergency fund is a priority, with 43% of Americans actively contributing to their emergency fund.
Where savings priorities vary
Savings priorities vary slightly when consumers are segmented by age and lifestyle factors, such as household income and whether or not they have children under 18.
For example, more Americans begin to prioritize retirement savings as they approach their 40s and 50s. Saving for retirement is the top priority for consumers aged 55-64, as 44% of Americans in this age group are saving money for retirement. However, failing to prioritize retirement savings early has a long-term impact that may not be realized until it’s too late. According to Transamerica, the median savings balance for baby boomers is around $202,000.
Trips also vary by age and income. Among all survey respondents, about 4 in 10 consumers save to travel. However, for Americans over 65, travel is the priority of savings. Travel is also more of a priority for Americans with higher household incomes. Among Americans with an annual household income above $100,000, 52% rank travel as a savings priority. Meanwhile, only 37% of Americans with household incomes under $100,000 save for a trip. Still, consumers across all demographics are willing to travel again after taking a break due to the pandemic, as 68% of Americans wanted to take more vacations than normal this year, according to a recent survey cited in the Motley. Crazy.
Why it’s time to rethink financial wellness
While it is a step in the right direction to see consumers recognize the importance of saving and actively contributing to their various savings goals, there is still work to be done.
For starters, community financial institutions need to rethink their approach to financial wellness and savings programs. In recent years, much of the conversation about financial wellness has focused on education, because people don’t always have the knowledge or skills to improve their personal financial situation. However, today’s consumers don’t need more high-level educational content, like content about the importance of budgeting and saving. They already know this and Plinqit’s State of Savings Report is proof of that.
For banks to support their customers in a meaningful way, they must provide them with the tools and personalized guidance they need to achieve their goals. Doing this well requires looking at transactional data, what a client’s savings goals are, and making recommendations and offers that are most relevant based on that data.
Suppose a customer wants to build up an emergency fund of $1,000 in case he is faced with an unexpected expense. Transactional data can show how much they can afford to save each month, and the bank can recommend that the customer set up an automatic deposit into their savings account for an amount that matches their monthly budget.
While many consumers may have similar savings priorities, such as contributing to an emergency fund, banks should not treat financial wellness as a single initiative. Each person’s financial situation, budget and needs vary. Financial education is undoubtedly important, as evidence has shown that financially savvy people are more likely to save and make smarter financial decisions. However, education is only part of the equation.
The State of Savings Report proves that an overwhelming majority of Americans want to grow their savings and create a more optimistic financial future. To make these dreams a reality, education is only the first step. The next step is to empower consumers to make positive changes to their financial behaviors, and with the right approach, community banks can provide the guidance and encouragement consumers need to turn positive changes into lifelong habits. .
The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice regarding your specific situation.
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