Back in May, Pew Research Center found that three out of four Americans felt they weren’t saving enough money. Of the 2,413 adults surveyed for the poll, a whopping 81% of people aged 30-49 knew that they weren’t putting enough money away for the rainy days – which, as we know, have now come in bucketfuls.
Apparently this is a trend that we have seen for quite some time. The rate of savings has been in an almost steady decline the past two decades, down to a mere 1% of a person’s income. This means someone bringing in an annual salary of $75,000 is saving just $750 per year! Surprisingly, even those people who consider themselves to be living comfortably still admit that they are not saving enough money (64%).
So, why are we not putting money away for the hard times? Is it that we are too caught up in making major purchases, or have we been afraid to admit that hard times could come? Perhaps the idea that someday things won’t be so bright (as we are seeing right now) scares us, and so we live from day to day doing the things we want to do and enjoying the good times while they are here.
Possibly we are not budgeting money efficiently and don’t see where that savings could come from. If we are spending way too much at the grocery store or on new clothes, we’ll end up scraping the bottom of the wallet at the end of the month. When you can’t finish a month on the upside, you can’t save money. If this is the case, contacting someone that can help you create a budget, or using software programs that do this, will help you cut back and learn how to save.
Or maybe the problem is that we don’t know how much we should be saving. Most will say that at least 10% of your paycheck should be tucked into a reitrement plan so that when the time comes you will have some money on which to live.
You should also have an emergency fund, which will cover fixed living expenses should something happen that makes you unable to work. The general guideline here is at least three months’ worth of money that would cover items such as car, food, housing and insurance should something happen. Yet if you can’t tuck away this much money quickly, at least keep a stash on hand that you continue to grow over time.
If you have children, you may want to increase the emergency fund to cover child related expenses should an emergency arise. These include medications and doctor visits.
What about college? Numerous factors come into play when considering college savings plans, including how long the children have before attending college, what type of college they’ll attend, how they will room when they get to college and what they might be studying. Here’s a calculator that will help you average how much you would want to put away for your children and their higher education.