How Much Are Americans Saving for College, Retirement and Emergencies?

Piggy Bank Savings Retirement EmergenciesEconomic experts have worried about the willingness of American consumers to plan adequately for their financial future and a national survey indicates the concern is justified.

Data On Financial Planning: Emergency Fund, College and Retirement

Less than half of adult consumers have put aside three months of emergency funds to deal with potential calamities, while only 39% have tried to figure out the savings they will need for retirement, according to the 2015 National Financial Capability Study (NFCS).

The study says that although there have been moderately positive changes in the management of day-to-day expenses, those improvements have not translated into increased planning for rainy-day funds, retirement, college savings and investments.

“We have a very fragile economy,’’Annamaria Lusardi, one of the authors of the study, said. “And half of our population could not face an emergency. That is troubling.

“It’s why people are tapping into their retirement accounts. It’s why people might go to their credit card to deal with an economic shock. What happens if we go back to a recession? People could not deal with it. In my view, this type of (emergency) planning is essential to financial capability and it is simply not happening at what I would consider an acceptable rate.’’

Other findings from the study conducted by the FINRA Investor Education Foundation include:

  • 56% of consumers are concerned about running out of money in retirement, a puzzling follow-up statistic when considering that only 39% have even begun to figure out their needed retirement savings.
  • 56% reported having a household budget, a number that remained consistent across gender, age groups and income levels.
  • The percentage of Americans saving for college has increased from 31% in 2009 to 41% in 2015. The flip side of that is 59% are not. Asians (54%) and Hispanics (45%) are more likely to be saving for college than African-Americans (39%) and whites (39%).
  • Less than one-third (30%) of adult consumers (age 18 and above) have investments in stocks, bonds, mutual funds or other securities outside of retirement accounts, a slight downturn from the 34% in 2009. But 21% of those investors say they are willing to take a risk, up from 12% six years earlier.

The NFCS study has been conducted since 2009. It polled more than 27,000 American adults from all 50 states on four areas of financial health: Making ends meet; planning ahead; managing financial products; and financial knowledge and decision-making.

Experts weren’t surprised at the dearth of investors, particularly given the low number of Americans who have liquid emergency funds. It was reinforcement of a 2014 study by Washington University in St. Louis that indicated nearly half of all Americans couldn’t come up with $2,000 within 30 days to cover a major illness or job layoff, leading to poor social, psychological and health outcomes for the entire household.

“It is very alarming to see such lack of emergency funds, but it is consistent with other studies,’’ said Ric Edelman, host of a weekly talk radio program on personal finance. “Most people are unprepared for major disruptions. They usually find themselves trying to recover from a crisis rather than getting through it by being better prepared.’’

There’s a similar story with retirement savings. More than half those surveyed (56%) are worried about running out of money in retirement, but only 39% have even investigated how much money they will need to maintain their current lifestyle when they quit working.

“I think it’s an indication that people are not comfortable or well-informed when it comes to retirement savings,’’ Lusardi, a business professor at George Washington University, said. “Our research shows that people who plan, have three times the amount of wealth than people who do not plan. A big predictor is higher retirement savings, but many employees don’t know where to start. The young people contributing (to retirement plans) are withdrawing funds from their account. The approach is not good.’’

Joseph Birkofer, principal and founder of Legacy Asset Management in Houston, said the survey’s findings are consistent with his experience.

“The concept of retirement is a meaningful way doesn’t really begin to dawn on somebody until their mid-40s, so it doesn’t surprise me they really have no focus or goals,’’ Birkofer said. “I frequently reference my 86-year-old father and ask people, ‘How will he buy his lunch?’

“There are only three sources: His savings, the government or his family. It’s a very stark way of getting people to understand that it’s a long, long retirement. You don’t want to rely on your government or your family to feed you.’’

According to the National Institute on Retirement Security, 45% of Americans don’t own any retirement-account assets, whether it’s an employer-sourced 401(k) plan or an Individual Retirement Account, while 62% of workers between the ages of 55 and 64 have retirement savings of less than one times their annual income.

There is some encouraging news when it comes to budgeting with more than half 56% of adult consumers having a household budget. Some experts debated its true meaning because it was a new question in the study, so there are no prior results to compare progress.

Edelman suggested that budgets are “overrated’’ because he said the proper emphasis should be placed on saving money to create wealth, not juggling credit card debt and expenses. Regardless, a 2012 Duke University report said a budget was “an invaluable tool’’ to help prioritize spending and manage money, regardless of income level.

“I think we need to add more questions about budgeting and drill down,’’ Gary Mottola, research director at FINRA Investor Education Foundation, and another of the study’s authors, said. “What does a budget mean to people? Are Millennials using budgeting apps that help them? Are people using pen and paper? Doing it in their heads? I’m encouraged, but I want to know more. How detailed and granular are these budgets?’’

“People might be interpreting budgets in different ways,’’ Lusardi said. “We see budgets across all the groups, but we don’t see them influencing behavior. They don’t appear to be helping people to save more or plan a lot more for retirement. It makes me wonder what sort of data we really captured.’’

Lusardi was most encouraged by the increased savings for children’s college education, particularly with higher or equal planning rates seen among Asians, Hispanics and African-Americans.

“African-Americans and Hispanics are often seen as very vulnerable groups in financial capability,’’ Lusardi said. “But we are seeing more people in these groups aspiring to a college education. They may be more motivated to plan because of recent financial situations and they could see a college education as an achievable door to the middle class.’’


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Grinstein-Weiss, M.; Russell, B.; Tucker, B.; and Comer, K. (2014, June), Lack of Emergency Savings Puts American Households at Risk, Center for Social Development, George Warren Brown School of Social Work, Washington University in St. Louis. Retrieved from

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