After almost a decade, Americans may finally be turning the corner on saving money. More than 30% of them say they have enough tucked away to cover six months’ worth of expenses—a seven-year high for this measure of financial calamity preparedness, a financial planning favorite.
Meanwhile, the percentage who concede in an annual survey that they have no savings fell to a six-year low of 24%, down from 28% last year. “Ever since the recession, we’ve noticed in surveys that people realize how important it is to have emergency savings, but for so many years post-recession they just weren’t making any progress,” said Greg McBride, chief financial analyst at Bankrate.com, which released the survey on Tuesday. Now a broader swath of people are finally making headway, he said.
The poll of 1,003 Americans, conducted by Princeton Survey Research Associates International, showed impressive savings habits among millennials, particularly younger ones, McBride said. Thirty-one percent of Americans age 18-26 have enough saved to cover three to five months’ worth of expenses. (Some, however, are likely living at home or with roommates—or counting their trust funds.)
“Millennials have a savings discipline that the preceding generations lacked,” he said. “They have a greater aversion to debt, they’re not as consumption-focused, and they have a greater propensity toward saving than we’ve seen in some time.”
To be fair to their parents, those younger workers also didn’t see savings depleted by long stretches of unemployment, a reality faced by many Americans age 53-62. Within that group, there’s a big divide when it comes to emergency savings. Among such young boomers, it’s where the greatest share of Americans—32%—say they have nothing set aside, while the same percentage say they have enough to cover at least six months. These folks were hit hard by recent financial downturns, McBride said, likely wiping out any financial cushion. Those who managed to stay employed through those hard times, however, still have a cash hoard in place.
Across America, personal saving as a percentage of disposable personal income tells a more subdued tale. The rate has turned up a bit and is well above its 2007 levels. At the same time, debt on household balance sheets has been building. McBride says that after the recession, many people made solid progress paying down debt or refinancing. Now Americans are putting more money into savings, but they’re also starting to add to their debt burden. “It’s gone almost full circle,” McBride said. “People started feeling better about their level of debt several years ago, but in the past 12 to 18 months, debt loads started to grow again, and now the comfort level people have with their debt isn’t as strong.”