Our Savings Accounts Are In Crisis

In these unprecedented times, people are feeling more overwhelmed than ever before because of economic uncertainty. This is, arguably, the worst time to be a consumer spender in one of the most underperforming economies in the United States. Zoe Han, the author of personal savings in America featured on Market Watch mentioned that "inflation has reached a 40-year high above 8%. The cost of living is above 1% since May of this year." Gasoline itself is at a national average of $5.00 per gallon, and the cost of groceries is up 10.8%.

We find ourselves in an uncomfortable predicament: our savings are collapsing. We are using money from our savings to cover higher costs that we normally would not have to worry about. It is a sad reality; however, we can combat the fear of progressively losing our savings by cutting on expenses that are unnecessary. Netflix for instance had its monthly HD subscription rise from $13.99 to $15.99. Rising subscription plans are a nuisance and would also be considered a waste if multiple of them that constantly do the same thing. Cutting back on costs is key to maintaining longer savings for items that are required for emergencies.

According to the Bureau of Economic Analysis, the savings rate of personal savings is currently at 4.4%. More Americans are feeling the pressure of rising prices and lower savings because of the economic predicament. Greg McBride, a chief financial analyst at Bankrate explained that many Americans are underwater. “Some 23% of households in the survey said they had no emergency savings. This shows that as more people earn disposable income, their savings aren’t thought out to the point of maintaining financial security among rising costs. In this case, it would be wise to set up a savings system where we wouldn't necessarily have to think about saving in the first place and preventing wasteful spending.” Greg McBride explains how we can make savings into a better reality by, “setting up a direct deposit into a savings account every month, that way the savings happen before you first even need to think about it.” If we were to hypothetically manually save at the end of each month, it is not sustainable because we're not tracking our spending accordingly. There is no consideration for the costs of rising goods because we think we are above the water when we are underwater with our savings.

Some of us live paycheck to paycheck, and this can be especially brutal. Can we survive doing it? Yes, but only when we recognize our spending habits, how much we spend on duplicate items every month, and taking note of the difference and price increases. We can reduce wasteful spending and recuperate our lost savings through that one strategy. Right now, it matters more than ever before to be tactical with spending, saving, and budgeting. If you would like to learn more information about the abhorrent rising inflation and how you can set better financial goals visit our previous blogs.

Here to help,

Your Financially Fit Team