A new study released by Capital One states that only 54 percent of Americans are satisfied with their current financial health and that for most people trying to save money, getting out of debt is their number one motivation. The study focused on 2,000 Americans, asking them specific questions about their savings goals, habits, and expectations for the next financial year. While there were some positive findings in the study, like the fact that 42 percent of Americans have dedicated themselves to saving $1,000-$5,000 this year, the study also revealed that many Americans find themselves unable to achieve even small savings goals because they’re still struggling to meet their basic monthly financial obligations.
The Scary Truth
In spite of the fact that wages in America are on the rise, 29 percent of Americans currently have zero money set aside for emergencies. Sixty-five percent say that while they have some savings, they certainly don’t have the recommended financial safety net of six months salary set aside to fall back on in case of an emergency. Having an empty savings account isn’t just financially risky. It can create major mental stress for those who feel like their financial footing could fall out from under them at any time.
America’s Savings Habits
Committing to a savings plan that makes automatic transfers to a savings account has been shown to be one of the most effective methods for achieving savings goals, but most of those polled in the Capital One study admitted they’re still sticking to the manual transfer method of savings. Only 21 percent of those asked said they choose to have money automatically transferred to their savings accounts every month. When savings aren’t an automatic part of an individual financial plan, it’s much more common to deprioritize the monthly commitment to putting money aside, especially when unexpected expenses arise.
Personal financial expert Nicole Lapin says automating savings is one of the keys to successfully meeting savings goals.
“Automating your savings is a great way to get started,” says Lapin. “It’s about a plan that you can stick to, similar to a regular diet. Even if it’s a small amount, automate it.”
Financial Health Equals Emotional Health
It turns out that money actually may be able to buy happiness after all. Saving money isn’t just about creating a sense of financial well-being . It’s about emotional and mental health as well. Fifty-three percent of Americans in the Capital One study said that saving money brought them peace of mind, helping them feel prepared for emergencies and other unforeseen circumstances. Many said that successfully meeting savings goals actually brought them a sense of happiness and significantly reduced stress in their relationships. Others reported feeling a sense of accomplishment and pride as their savings accounts grew.
Lapin agrees that the link between saving money and feeling good is very real. For those who have trouble motivating themselves to save, she recommends the simple trick of naming savings accounts.
“Put a name on what you’re saving for,” says Lapin. “If you name your savings account, you can visualize what you get for your savings. Creating sub-savings accounts to save for different goals keeps savers motivated.”
How Motivated Are We to Save?
Saving isn’t easy, but many in the Capital One study said they were willing to make significant sacrifices to meet their savings goals. Spending choices like going on vacation and regularly buying designer coffee were the easiest expenses for people to sacrifice, but many Americans were also willing to give up basic comforts like air conditioning and frequent showering if it meant more money in their savings accounts. Perhaps most shocking of all, 30 percent of those polled said they’d be willing to give up their precious cell phones for as long as six months to keep more money in their bank accounts and nearly a quarter said they’d be willing to give up internet access for a year.
While cutting back on unnecessary spending is a great way to save money, Lapin says saving money doesn’t always have to feel like a sacrifice.
“Savings is not a chore,” says Lapin. “You’re investing in yourself.”
The Future of Savings
While it’s clear that many Americans are still struggling to meet their savings goals, there are positive signs that people are making real efforts to take control of their financial futures. A new retirement savings study revealed that millennials and baby boomers are currently saving for their retirement at the same rate — 8-9 percent of their monthly incomes. That could mean improved financial health for an entire generation if millennials stick to their savings plans.
