“A prudent forager makes the very best of their feeding opportunities,” notes the British Trust for Ornithology. “This involves storing food during times of plenty so that these morsels can be retrieved during times of scarcity.”
Squirrels are examples of good foragers, notes the article, “eating acorns that will perish quickly while storing those that have a longer shelf-life.”
Consumers may be likened to nature’s savers, collecting reserves of financial resources in more plentiful times to be utilized at a later date.
This week, an exploration of challenges, habits, and trends for American savers: How do we “squirrel it away?" Are we prudent foragers?
‘From little acorns mighty oaks do grow.’ --American proverb
Learn “Where and How America Savers Save,” per survey results presented by America Saves.
Results do not include retirement savings.
Bank savings accounts (favored by 64%) and credit union savings accounts (a favorite for 37%) are the most popular savings products used by survey participants and are especially important for those at low- to moderate-income levels.
Other caches for saving include checking accounts (34%), a “safe place at home” (21%), money market accounts (15%), and/or brokerage accounts (12%).
Used with lesser frequency are CDs (10%), education savings plans such as the 529 (9%), Christmas clubs (9%), savings bonds (7%), savings option on prepaid debit (4%), or “informal savings circle” (1%).
Electronic funds transfers and direct payroll deposit are the two most popular methods to save. “Nearly 30% of those under 25 chose ‘payroll deposit’ as their main method of saving.”
Top reasons to save for those 35+ include setting aside funds for retirement, debt coverage, and vacations. Younger people set aside dollars for education, vehicles, and special events.
Still, “62% of Americans Have Under $1,000 in Savings, Survey Finds,” notes GOBankingRates.
“It’s worrisome that such a large percentage of Americans have so little set aside in a savings account,” says Cameron Huddleston, columnist and personal finance expert for GOBankingRates. “It suggests that they likely don’t have cash reserves to cover an emergency” so surprise expenses are often paid on credit, with help from friends and family, or by accessing retirement funds.
One-third of those with less than $1,000 in reserves have no savings account.
Those with savings accounts most often have a balance of at least $10,000.
“Young Americans are Giving Up on Getting Rich,” notes Bloomberg. But “despite debt, stagnant wages, and sluggish economic growth, young people may yet find a path to prosperity.”
Young people have time on their side, and prudent savings habits have potential to pay off for this group.
Bloomberg’s poll of those 18-35 shows 21% save nothing; 22% set aside 1-5% of their wages; 24% sock away 6-10% of income; 14% save 11-19% of earnings; 14% save at least 20% of their income; and 5% are not sure how much they save.
Are your younger members setting firm foundations with their savings habits?
‘Acorns were good until bread was found.’ --Francis Bacon
Of course, retirement saving is an important consideration. Research shows unique challenges for particular groups.
“Women Have to Work Harder to Catch Up in Retirement Saving,” notes benefitspro.com. Contributing factors to this circumstance for women are longer life expectancies, larger health care costs, lower savings, and lower median incomes.
Women are making strides, though, while “men are either holding steady or actually losing ground,” the article notes.
Confidence is a factor as men have more of it. Lack of confidence “can hold women back in making financial decisions” but also causes men “to forge ahead with negative financial behaviors.”
Further, women take greater advantage of financial education benefits offered by employers.
Another Bloomberg article notes “Women Are a Quarter Million Dollars Short of Retirement". Women fall $268,000 short of needed funds for a comfortable retirement at age 65.
Men are, on average, $212,000 short.
The article suggests women set retirement funds aside sooner, identify appropriate goals, and estimate required reserves.
Boomers still feel the effects of the recession and retirements for this group are “in jeopardy” according to an article at the Huffington Post. Twenty-six percent of a Bankrate.com survey say their finances have “deteriorated in the past year”, a grim state no other age group reports.
Seventeen percent of boomers have used retirement accounts to cover financial emergencies.
Notes Greg McBride, Bankrate’s chief financial analyst, “Americans age 50 and up have the highest propensity for tapping their retirement accounts for unplanned expenses…Those are the years you ought to be piling money into retirement savings and not depleting it prematurely.”
Overall, surveys show 21 million Americans do not save for retirement. In excess of 30 million Americans accessed retirement funds during the last year; millennials are least likely to do so—true for only 8% of this group.
“I’m concerned about this generation that hasn’t saved enough and particularly those who are depleting what limited retirement savings they have either early in retirement or the years leading up to retirement,” McBride says of boomers “They’re going to have to work longer, save more, and dial down their expectations of what they want in retirement.”
‘The creation of a thousand forests is in one acorn.’ --Ralph Waldo Emerson
How about those empty nesters? Are they taking advantage of lesser expenses to expand savings accounts?
“For Empty Nesters, Spending May Trump Extra Saving,” notes The Wall Street Journal. A Boston College Center for Retirement Research study indicates “Households do not increase their savings very much even when the kids leave home,” the article says.
Indeed, savings are not increased until, on average, more than eight years have elapsed since the final child leaves home. At this time, parents up savings to 401(k) tax-deferred accounts by just less than 1% of income.
Also, “52% of working-age households are at risk of being unable to maintain their pre-retirement standard of living after they start working” which alludes to the severity of a retirement savings crisis.
Empty nesters choose to spend money on “pent-up projects” such as home improvements, costing on average $35,000.
Nature’s foragers use landmarks to locate their gathered stores, claims the British Trust for Ornithology. Jays sometimes forget where stashes are located, and “up to 75% of these caches may be later retrieved.”
Are consumers forgetting savings landmarks or goals? How often are stashes raided or lost, thus jeopardizing necessary reserves for a comfortable existence?
Know how you can help your members become prudent foragers.