What’s more American than baseball and mom’s apple pie? We have many symbols of what being an American is all about. We are proud of being the land of the free, the home of the brave. Yet, we know in many areas, the U.S ranks much lower than many other countries when it comes to longevity, academic achievement and savings, just to name a few.
Since it’s America Saves Week, should we celebrate our progress or is it a rally call to make changes? I think it’s both. Despite the economic challenges over the past few years, savings rates have stayed relatively stable, bouncing between 3.7% and 5.4%. In fact, savings rates are up from 2007 when the average savings rate had dipped to 2.4%. However, we pale by comparison to Belgium, Germany, Switzerland, France and Spain, who all boast saving rates of over 10%.
In 401(k) retirement plans, the average savings rate is 7.3%. We have seen improvement with the millennium’s savings rates with an average savings rate of 4.6%. Many people are benefiting from employer sponsored 401(k) plans where they are automatically enrolled. There is the option to opt out, but most do not. So, if you are saving in your retirement plan, you are likely doing better than the average American when it comes to savings. Yet, if we stay at these low savings rates, most Americans will be woefully short of what they will need for their retirement.
How do you rank compared to the average? Keep in mind our average is nothing to write home about. If you aren’t saving–or you are not saving enough–think about how you can change that. Here are three pointers that may help along the way.
First, have a goal. It’s easier to save when it’s for something important for you and your family. When we talk about saving for retirement, we suggest framing it around “your future.” When you retire, do you want to travel, spend time with the grand kids, or volunteer in your community? That picture is much more motivating for me than just thinking about how much money I will need when I am old!
Second, have a plan. A few simple calculations can help you determine how much you should be saving. Personally, I like to think about how much I can put aside from each paycheck because it feels less imposing than a big annual savings goal.
Third, take small steps. If you start saving 5% from each paycheck, can you increase that 1% each year? Perhaps when you get your next raise, you could even bump it up by 2%. Whether it’s at the start of a new year, on your birthday, or some other special date, pick one that will be a good time for you to stop and think about your next best step to increase your savings.
Americans may still be lagging other countries in savings rates, but we as individuals can all take steps to improve our own savings averages. Take a minute during America Saves Week to check on your savings habits. Can you take a small step that will increase your savings?