Even as the economy slowly gains stronger footing, most Americans don’t have much in the rainy day fund and are feeling woefully unprepared for their long-term financial future, according to a national survey on household savings conducted by the Consumer Federation of America.
When asked if they were making progress on meeting their savings needs, only 35 percent said they were making “good” or “excellent” progress, while 63 percent of those surveyed were making “fair” or “no” progress.
Stephen Brobeck, executive director of the Washington, D.C.-based organization, noted: “Only about one-third of Americans are living within their means and think they are prepared for the long-term financial future. One-third are living within their means, but are often not prepared for this long-term future. And one-third are struggling to live within their means.”
Although the unemployment rate is improving, the number of people out of work or underemployed is still relatively high. Real wages have been stagnant and fewer middle class families are building wealth as they had in the past through homeownership.
The percentage of people building equity in their homes or other property declined from about 68 percent in 2010 to 54 percent this year. The percentage who expect to pay off their mortgage debt before they retire fell from 78 percent in 2010 to about 68 percent today.
The survey was conducted by ORC International, which used a representative sample of 1,018 adult Americans to interview by telephone from Jan. 30 to Feb. 2.
Financial adviser P.J. DiNuzzo said many individuals do not save enough in their retirement accounts, and the savings shortfall is even more pronounced in their after-tax cash reserve accounts.
“This can be attributed to the continued economic effects of the 2008-2009 super recession along with inflation regarding household staples such as groceries,” said DiNuzzo, president and CEO of DiNuzzo Index Advisors in Beaver, Pa. “Food prices have gone through the roof in the last couple of years.”
Judy Sorensen, president of the Association of Credit Counseling Professionals in Falmouth, Maine, said it’s no secret many Americans are struggling to make ends meet. Out of sheer necessity, she said, many people are putting off saving in any measurable fashion and are using credit cards to supplement earnings.
“While this approach provides short-term relief, the inevitable outcome is a double-whammy to overall financial health,” Sorensen said. “The lack of savings for unexpected life events is difficult enough, but when it is combined with high levels of credit-card debt, the impact is significantly greater.
“The average American can have a savings hiatus for some finite period of time out of necessity and begin to save again. But if they are incurring debt at the same time, they are thwarting their ability to save for months or possibly years into the future.”