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What Today’s Americans Are Saving For

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What Today’s Americans Are Saving For

CEO and Founder of Plinqit, the only savings app of its kind that pays users for learning about finance and savings.

From the pandemic to inflation, today’s consumers have faced several economic challenges recently. With the inflated prices of basic goods, including groceries, gas and rent, Americans have been forced to strike a balance between affording everyday necessities and building up their savings, and prioritizing their other financial goals.

So, what are Americans saving for and where do their financial priorities stand? Perhaps the most important question of all is: What are banks doing to help customers pursue and achieve their financial goals despite these challenges?

The good news is most consumers recognize the importance of saving money, and Plinqit’s State of Savings Report proves it, as 91% of respondents said they are putting aside at least some money. Given the economic uncertainty over the last few years, Americans are concerned about how they use their next paycheck. According to a survey by Mint, 21% of consumers surveyed have increased their savings in the wake of the pandemic.

So, what are Americans saving for?

One of the top categories for saving this year was for paying off debt. The State of Savings Report reveals that nearly half of Americans, 42%, are putting money aside to pay down their debt. Given the recent economic climate that led many Americans to rack up additional debt to make ends meet and the Fed’s interest rate hikes that have made it more expensive to borrow, it is no surprise that paying off debt is a top priority among consumers.

Yet, it’s worth distinguishing this “savings” category from the rest, as paying off debt is not the same as contributing to a savings account or putting money towards retirement. Many consumers are balancing their debt obligations while building up their savings and pursuing other financial goals.

Nearly Half Of Americans Are Setting 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 losses. Conventional wisdom recommends stashing away six to 12 months’ worth of savings, enough to cover one’s living expenses. Consumers are taking this advice to heart, as Plinqit’s State of Savings Report reveals 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 they have children under the age of 18.

For example, more Americans are starting to prioritize retirement savings as they approach their 40s and 50s. Saving for retirement is the top priority for consumers between ages 55 and 64, as 44% of Americans in this age group are setting aside 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 about $202,000.

Travel also varies by age and income. Across all survey respondents, about 4 in 10 consumers are saving to travel. However, for Americans over the age of 65, travel is the top savings priority. Travel is also more of a priority for Americans with higher household incomes. Of Americans with an annual household income greater than $100,000, 52% rank travel as a savings priority. Meanwhile, just 37% of Americans with a household income that is less than $100,000 are saving for a trip. Still, consumers across demographics are ready to travel again after taking a hiatus due to the pandemic, as 68% of Americans wanted to take more vacations than normal this year, according to a recent poll cited in the Motley Fool.

Why It’s Time To Rethink Financial Wellness

While it is a step in the right direction to see that consumers recognize the importance of saving and are actively contributing to their various savings goals, there is still work to be done.

To start, community financial institutions must rethink how they approach financial wellness and savings programs. For the last several years, much of the conversation around financial wellness has focused on education, as people do not always have the knowledge or skills to improve their personal financial situation. However, today’s consumers do not need more high-level educational content, like content about the importance of budgeting and saving. They know this already and Plinqit’s State of Savings Report is a testament to that.

For banks to meaningfully support customers, banks must give them the tools and personalized guidance they need to reach their goals. To do this well requires looking at transactional data, what a customer’s savings goals are and making recommendations and offers that are most relevant based on that data.

Say a customer wants to set up an emergency fund of $1,000 in case they are faced with an unexpected expense. Transactional data can show how much they can afford to save each month and the bank can recommend the customer set up an automatic deposit to their savings account for an amount that fits in 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 one-size-fits-all initiative. Each person’s financial situation, budget and needs will vary. Financial education is undoubtedly important, as evidence has shown that financially savvy individuals are more likely to save and make smarter financial decisions. However, education is only one 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 just the first step. The next step requires empowering 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 permanent habits.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

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