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New Reports Suggest Americans Are Not Saving Enough

Kimberly Palmer

Americans view savings much as they view kale: It's a luxury that they can't afford, even if they know it's good for them. According to a survey released Monday from Bankrate.com, 26 percent of Americans lack any emergency savings at all, and two-thirds have saved up less than six months' worth of expenses. The most squeezed group is the one between ages 30 and 49, who often have children depending on them.

Young Americans under age 30 were the most likely to have five months' worth of expenses stored up, which is largely do to the fact that their expenses are smaller. They're more likely to live with parents or roommates, which means their housing costs are lower. Greg McBride, chief financial analyst at Bankrate.com, points out that even most of the highest-income households, which bring in $75,000 or more a year, fail to store up six months worth of savings.

Also this week, new research released from Oxford Economics, an economic consultancy, suggests that if Americans could save more money, then the country would have a healthier economy. In fact, the group suggests that if policymakers fail to help Americans change their savings habit, the economy will suffer in the long run.

[Read: How to Measure Your Financial Literacy.]

The report, "Another Penny Saved: The Economic Benefits of Higher U.S. Household Saving," predicts that based on current savings rates, households will set aside just 3 percent of their income over the next 20 years, while a healthier rate for economic growth would be a savings rate of 5 to 9 percent. A higher savings rate would lead to more robust GDP growth and lessen American dependency on foreign borrowing, the report concludes.

At a U.S. Savings Forum on Tuesday hosted by Oxford Economics, Robert Moore, president of the investment company LPL Financial, said one of the best ways to boost savings rates, particularly among low-income Americans, is to "have a more robust economy where you have better access to jobs." Jobs, he said, are the ultimate equalizer, because they enable people to bring more money home, which gives them options in terms of what to do with that income. He also pushed for more financial literacy in schools.

Lisa Mensah, executive director of the Aspen Institute, an educational and policy studies organization, said during the forum that financial literacy has to feel "real" and not abstract. One way to do that, she said, is to start savings accounts in children's names at birth, a policy already enacted in the United Kingdom. "We won't get the culture change we seek until we link this with real money," she said, adding that a bill to do just that is currently being considered by lawmakers. "You've got to find a way to get in from the beginning, into a system that's safe and fair."

[Read: Why Millennials Still Don't Save Enough.]

While people often assume that low-income Americans simply can't save, Mensah said that with better incentives and systems in place to make it easier, like refundable tax credits, it is possible for almost everyone to put aside money. "It does seem like you can't do anything when your wages have fallen ... [but] even if you experience periods of unemployment, you can come back into the savings system if it's automatic," she says, singling out automatic individual retirement accounts as examples.

Even people who work in low-wage jobs such as at gas stations or hair salons can save if the savings is rewarded by tools such as matching or tax credits, Mensah said. "Even for those who struggle with a lower wage, the government or financial institution will] match your savings automatically, so then we really start to turn the dial on who gets advantaged in the system," she added.

Bob Reynolds, president and CEO at Putnam Investments, noted that automatic savings features, like employees being automatically enrolled in retirement savings accounts, "have proven they work, so we need to encourage more companies to take advantage of them." He says that once people get started with automatic savings accounts, they tend to continue to put money into them. Policymakers should also turn their attention to workers who don't have access to workplace savings tools, because they might need other tools and incentives at their disposal.

Once employees start saving 10 percent of their income and get invested in the appropriate asset allocation, they can realistically be on track to replace their income during retirement, Reynolds said.

[See: 10 Things Everyone Should Know About Money.]

The Oxford Economics report, which was supported by a handful of corporations, think tanks and groups, including AARP and the U.S. Chamber of Commerce, calls payroll deductions at work the "most powerful factor" when it comes to encouraging greater savings. Automatically enrolling employees into workplace savings account with the option to opt out, rather than requiring them to opt in, has also increased participation rates.

That challenge is often persuading companies to take this step on behalf of their employees and then encouraging employees to continue to ramp up and manage their savings over time.

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