Budgeting & Saving

According to the National Bureau of Economics, more than 50 percent of Americans have less than $2000 in savings. This may be because only 15 percent of the population maintains a budget. We're here to help you learn how to budget and set realistic savings goals for longterm financial prosperity.

Choose Your Debt Amount

Home » Financial Literacy » Budgeting & Saving

Why Is Saving So Important?

When it comes to financial advice, forget the gurus, websites, bankers, late-night infomercials and rich uncles. The best source can be found in your wallet, assuming you carry around $100 bills.

The rumpled face of Benjamin Franklin graces the bill. He was a Founding Father full of timeless financial wisdom. Unfortunately, many Americans have stopped listening to his most famous money tip:

“A penny saved is a penny earned.”

About half of all Americans haven’t saved a penny. Really, 21% don’t have a savings account and 28 percent have one but there’s nothing in it, according to a 2015 study by GoBankingRates.

If Franklin were still alive that statistic might kill him. Saving is the lifeblood of financial success, not to mention a good night’s sleep.

How many hours are lost worrying about where the money will come for retirement, emergencies, the kids’ college education or just next month’s phone bill?

Successful savers don’t have to break out their credit card when their air conditioning unit conks out or they have medical bills not covered by insurance. They have the flexibility to invest in their dreams.

They can retire to a life of travel and golf instead of bagging groceries. They can die with the comfort of knowing they’ve left money to help relatives and friends.

There are countless reasons why you should save, but a lot of people come up with even more reasons why they can’t. Nobody, including Franklin, said it would be easy. The first thing it takes is the proper mindset.

“Rather go to bed without dinner than to rise in debt,” Franklin wrote in his 1758 essay “The Way to Wealth.”

» Learn More: Budgeting Tips for Families

Average Savings Rate In The United States

Considering the average U.S. household is $130,922 in debt, it seems a lot of Americans are going to bed with full stomachs. Being in debt makes it harder to save, which helps explain why the average personal savings rate has hovered around 5% the past few years.

That’s not historically low, since it hit 1.9% in 2005. But it averaged 9.8% from 1950-2000, peaking at 17% in 1975.

The slide is across the board. The GoBankingRates study showed 74% of people ages 18-25 have less than $1,000 in savings. The number is 68% for people ages 35-44 and 65-and-over.

As for gender, 50% of women and 49.7% of men have nothing in their savings account or no account at all. A study by the Pew Charitable Trusts found that 70% of Americans found it hard to save due to unexpected expenses, and 25% said unanticipated expenses happen every month.

If they happen every month, how unexpected can they really be?

That gets back to mindset. People don’t assume their car will ever break down or their kid will need braces. They complain about tight budgets as they sip $5 lattes while standing in line to buy the latest iPhone.

As Franklin said, “Make your own darned coffee!”

Actually, he never said that as far as anyone knows. But he did say, “Our necessities never equal our wants.”

In other words, there are things you need and things you want. Do you really need to buy lunch at Chipotle instead of making a sandwich at home? Do you have to spend $200 a month on premium cable and phone packages? Or, can you get by with a cheap cell phone plan?

Americans’ Budgeting and Saving Behavior

Nearly one third of Americans report they would find it difficult to cover a $2000 financial emergency. Americans with low cash reserves are vulnerable to high cost borrowing that can set them further behind, like payday loans and credit card debt. The 2015 FINRA Study sheds light on budgeting and saving behavior, finding that a large percent of Americans are spending more than they make and not saving. Overspending on nonessentials and low income contribute to household budgets that are out of balance.

How To Start Saving Money

Saving is like anything else, it takes practice to get good at it. You can start small, like cutting out the lattes. Put that extra $20 a week in a savings account.

They’re easy enough to open at a bank or credit union. All you need is an ID and a little resolve. Just be sure to keep the minimum amount in the account to avoid service fees. Get in the habit of saving and get a plan.

“By failing to prepare, you are preparing to fail,” Franklin said.

The first thing is to save an emergency fund. If you lose your job, you need enough to cover three to nine months of living expenses.

Expect the unexpected. You know you’ll eventually need to replace your car or get a new roof on your house. Write down how much that will cost. If you think you’ll need $10,000 to put toward a car in four years, you’ll need to save $208 a month. If too much of your income is already going to credit card debt payments, you may benefit from credit counseling.

Saving is like anything else, it takes practice to get good at it.

Look at your budget, line by line, and figure out how to cut 10 percent from each category. For example, you can save money on your energy bills by adjusting your thermostat and insulating your home better. Research strategies for how to save money on food, transportation and housing expenses.

That can hurt, but there are ways to ease the pain. Automate your saving, meaning money is automatically deposited in a savings account and you never see it.

Separate your savings account from your checking account, and designate that your savings can only be touched in extraordinary circumstances. Botox treatments for your 25th high school reunion are not extraordinary circumstances.

Long-term saving automation is even easier. If your employer has a 401(k) plan, jump on it. They didn’t have them when Franklin was around, but today’s experts recommend putting aside 10-15% of your salary. The more, the better since most companies match your contribution to a point.

If your workplace doesn’t have a 401(k) you should set up a personal IRA and designate a percentage of your paycheck be directly deposited into it. The key in all this is to live within your means.

“If you know how to spend less than you get, you have the philosopher’s stone,” Franklin said.

The philosopher’s stone is nice, but there are actual tips and tools available to help you reach your savings goals. A good source is America Saves, a Consumer Federation of America campaign that promotes savings. It starts with taking a pledge

“I pledge to save money, reduce debt, and build wealth over time. I will encourage my family and friends to do the same.”

That sounds like something Franklin would have said. If you take it to heart, one day you will open your wallet and there will be a bunch of Benjamins smiling back at you.

How To Budget

Step-by-step instructions on how to calculate your monthly income, add up your expenses, and determine your monthly surplus or deficit. Also, tips on how to maintain a budget with apps and software, spend less and save more.

More on how to budget

How To Cut Expenses

Cutting expenses isn’t as painful as you may think. By examining your budget closely and comparison shopping, you can find opportunities to save money in every category. This will boost your savings and help you achieve your financial goals.

More on how to cut your expenses

Finding A Bank

Your bank can be a partner in your financial success. But choosing the right one can be difficult. You want a bank with low to no fees on your most common transactions.

More on finding a bank

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


  1. (Kirkham, E.)(2015, Oct. 5) 62% of Americans Have Under $1,000 in Savings, Survey Finds. Retrieved from http://www.gobankingrates.com/savings-account/62-percent-americans-under-1000-savings-survey-finds
  2. (Carrns, A.)(2016, Jan. 8) Unexpected, but Not Unusual, Expenses Thwart Efforts to Save. Retrieved from http://www.nytimes.com/2016/01/09/your-money/unexpected-but-not-unusual-expenses-thwart-efforts-to-save.html
  3. (NA)(2016, Jan. 7) Barriers to Saving and Policy Opportunities. Retrieved from http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/01/barriers-to-saving-and-policy-opportunities
  4. (NA)(ND) Personal Savings Rate. Retrieved from https://research.stlouisfed.org/fred2/data/PSAVERT.txt