Americans Think Other Americans Are Not Saving Enough
When asked whether they think Americans are saving adequately, nearly four-fifths (79%) said they are not, with nearly half (47%) saying Americans are saving "very inadequately." Among demographic groups, the college- educated are most likely (86%) to think Americans are saving inadequately. Respondents are also somewhat pessimistic about the chances of most Americans to accumulate significant wealth. When asked what percentage of young Americans are likely to accumulate $1 million during their lifetimes, the typical response was only 10 percent.
"Americans are pessimistic about how other Americans are saving and how they will save in the future," noted Brobeck. "In part, this pessimism probably reflects widespread press coverage about the country's zero or near- zero personal savings rate," he added.
Most Americans Do Not Think They Are Saving Adequately
More than half of Americans (52%) say they are not saving adequately. Seventeen percent say they cannot afford to save at all, while 35 percent say they are saving but not enough to meet short- and long-term financial needs. Higher percentages say they have adequate savings to pay for unexpected expenses like car repairs or emergency dental treatment (68%) or to pay for regular household expenses for several months if there's a job loss (58%). And more than half (53%) say they are saving adequately for retirement. But when all short- and long-term financial needs are considered, only 44 percent say they are saving, or have already saved, adequately.
Predictably, the highest income group (at least $75,000) is about twice as likely as the lowest income group (under $25,000) to say they have saved adequately for each of the above purposes. Over one-third (34%) of low-income Americans say they cannot afford to save at present. The high-income group is also most likely to believe they can accumulate $1 million during their lifetime. In fact, when asked about the chances of accumulating this amount, the typical response among the high-income group was 75 percent. For those with incomes under $35,000, it was only one percent, and for those with incomes between $35,000 and $50,000, it was only two percent. For all respondents, the typical response was 10 percent.
"Americans are more positive about their own saving than about that of the country as a whole, yet a majority still believe they are not saving adequately," Black said.
Americans Cite Understanding Interest Compounding as Essential to Successful Saving
The inadequate savers, and non-savers, also identified the most important factors in persuading them to save more than they currently do. They cited access to attractive savings accounts as the most important general factor, such as a contributory retirement program like a 401(k) (75% important, 52% very important), easy access to a savings account paying 5% (73% important, 39% very important), and automatic transfers from checking or payroll deposits to savings (65% important, 36% very important).
Less important for these inadequate savers was encouragement from one's bank or credit union, employer, and friends and family, or advice from a financial planner or credit counselor. Between 49% and 60% considered these factors important, and between 20% and 25% considered them very important. But the most surprising finding here was that when respondents were told that "saving $200 a month for 30 years at a 5% rate would accumulate over $300,000," 80 percent said this knowledge was important in persuading them to save, with 62 percent saying it was very important.
"Knowledge of the 'miracle' of interest compounding clearly can have a significant influence in persuading Americans to save more effectively," Black said. "So we want to work with America Saves to get that message out to more Americans: Small amounts of savings can add up significantly over time."
Young Adults Face The Toughest Savings Challenges
Young adults 18-24 years old are the most likely demographic group to say they are not saving adequately (62% versus 52% for all Americans). And these young adults who are not saving adequately were far more likely, than older Americans, to cite social and psychological factors as important barriers to savings. Far larger percentages of young adults, than all Americans, cited spending to feel good (54% versus 29%), social pressure from friends of family (38% versus 20%), and trips to the mall (32% versus 15%) as factors making it difficult to save. And over half (53%) cited impulse spending as an important reason they had difficulty saving (compared to 37% of everyone).
Several savings strategies were relatively attractive to these inadequate savers, especially interest compounding (91% important, 61% very important) and encouragement from friends and family (83% important, 50% very important).
"Savings programs need to direct special attention to young adults and, in doing so, try to reduce social and psychological as well as economic barriers," Black said.
