Americans have burned through their savings (2024)
A new poll for Newsweek showed that more than a fifth of Americans are without any savings, with another fifth saying that they have less than $1,000 in their bank accounts, a signal of how precarious some voters feel about their financial situation even as the U.S. economy has withstood the shocks of a high interest rate environment.
Asked "how much money do you personally hold in personal savings accounts," 22 percent answered "I don't have any savings" while another 20 percent said they had less than $1,000. Other answers revealed that 15 percent had between $1,000 to $5,000, 10 percent with savings of $5,000 to $10,000, 13 percent boasted $10,000 to $20,000 of cash in their bank accounts while 20 percent had more than $20,000.
In a sign of how precarious the economic situation was for some Americans, 23 percent of those surveyed said they only had a "few days" of savings left to finance their basic costs of living, the poll showed. The survey by Redfield & Wilton Strategies for Newsweek was carried out on January 18 with a sample size of 1,500 eligible voters in the U.S.
The poll results come amid a period of uncertainty for the U.S. economy, which has been shaped by elevated interest rates put in place by the Federal Reserve policymakers to slow down soaring inflation that at one point hit four-decade highs. For the better part of 2023, voters kept telling pollsters about their anxieties about the economy, worried that the country was headed in the wrong direction.
Inflation has slowed to 3.4 percent in December from the 9 percent peak it reached in the summer of 2022. But the hike in rates has reverberated through the economy, pushing up borrowing costs for things like homes, auto loans and business investment.
The acceleration of rates at their fastest clip since the 1980s to their current two-decade high of 5.25 to 5.5 percent was expected to slow down the economy and even plunge it into a recession and lead to mass layoffs.
But the economy has proved far more resilient than anticipated. Employers have kept hiring, wages have kept pace with inflation and some experts are projecting a soft landing, where the Fed's rate moves would help moderate inflation without doing too much damage to the jobs market. In December, Fed policymakers indicated that they were done raising rates for the foreseeable future.
"The odds of a recession have declined over the past several months because of a strong labor market, a deceleration in inflation, and looser financial conditions on the back of the impending Fed pivot to rate cuts," Oxford Economics analysts said in a note last week shared with Newsweek. "Our subjective odds of a recession this year are now less than 50 [percent]."
This shift has begun to be captured in some surveys, where some Americans are feeling a little more confident about their financial conditions compared to only a few months ago.
When it comes to the pocketbooks of Americans, Oxford Economics analysts suggest that with Americans still keeping their jobs and earning, this will buoy the economy.
"While we expect the pace of spending to slow in 2024, there are reasons to believe consumers will keep their wallets open. Strong wage gains alongside falling inflation means real wage gains will remain a support to consumption," they said.
There were risks, though, to the soft landing scenario, Oxford Economics warned.
"The key downside risks to our forecast are the potential for policy uncertainty to weigh on hiring and investment more than anticipated, sudden weakness to the supply side of the economy, and geopolitical tensions," they said.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Americans haven't been stashing money into their savings accounts like they used to, according to government statistics. That's part of the reason why consumer spending has been so robust since the economy ascended from pandemic depths, despite high inflation and elevated interest rates.
According to our survey, roughly 28% of Americans across all four generations currently have less than $1,000 in personal savings, including emergency funds, non-workplace retirement accounts and investments.
Other answers revealed that 15 percent had between $1,000 to $5,000, 10 percent with savings of $5,000 to $10,000, 13 percent boasted $10,000 to $20,000 of cash in their bank accounts while 20 percent had more than $20,000.
But Americans are choosing to spend more right now rather than save for those potential shocks for a few reasons. For one, everything consumers buy has become more expensive, said Mark Hamrick at Bankrate.
Nearly half of Americans have $500 or less in their savings accounts, an amount that leaves them vulnerable to unexpected expenses, according to a GOBankingRates survey of 1,063 U.S. adults conducted in November 2023.
Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
How much does the average American have in savings? Excluding retirement assets, the average American has $65,100 in savings, according to Northwestern Mutual's 2023 Planning & Progress Study.
Saving $1,000 per month can be a good sign, as it means you're setting aside money for emergencies and long-term goals. However, if you're ignoring high-interest debt to meet your savings goals, you might want to switch gears and focus on paying off debt first.
The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
Can I retire on 500k plus Social Security? As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, this becomes even more of a possibility. In retirement, Social Security benefits can provide an additional $1,900 per month, on average.
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
Individuals who have not saved for retirement and who still own homes can turn to their homes as a source of income. For some, this could mean renting a portion of their space as a separate apartment. Another option is to take a reverse mortgage on a home, although doing so can be costly and complicated.
Contrarily, the wealthiest 20% of households still maintain cash savings at approximately 8% above pre-pandemic levels. Ultimately, with inflation taken into account, the majority of Americans are worse off financially compared with before the start of the pandemic.
In all, 9,000 banks failed--taking with them $7 billion in depositors' assets. And in the 1930s there was no such thing as deposit insurance--this was a New Deal reform. When a bank failed the depositors were simply left without a penny. The life savings of millions of Americans were wiped out by the bank failures.
Americans saved only 3.6% of their disposable personal income in February 2024, according to data from the Federal Reserve of St. Louis. That's down from 5.3% a decade ago, and far below the average savings rates before the COVID-19 pandemic.
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