Despite growth in the US economy over the last month, as well as the creation of new jobs, it seems that the real-world situation for many families isn’t as rosy as the statistics would suggest.
According to new research by banknote.com released this week, a staggering number of people are getting by from paycheck to paycheck. In fact, as many as 27% of us have no savings at all, rising to 76% of the 1,000 people surveyed who wouldn’t be able to survive on their savings for over six months in the unfortunate event of illness or job loss.
Precisely half of all Americans wouldn’t be able to fund themselves for over three months if the worst should happen.
While the scale of these numbers is shocking, they fact that so many people are living hand to mouth isn’t altogether a surprise. For too many people, the average paycheck only just covers childcare, housing, commuting and general living expenses; luxuries are rarely accounted for, much less saving for the future.
As putting money aside is virtually an impossibility for a large majority of families, it adds additional pressure on those who are already seeing their money run out by the end of the month. And even if the family income does cover day to day expenses, the stress of an unexpected event can throw everything into disarray – none of us are totally immune from a sudden change in employment, and even something as commonplace as a car break down or a refrigerator breaking can exceed the average person’s savings.
This is backed up by a similar survey which suggests that 22% of people have less that $100 of emergency saving funds (and nearly half of all people surveyed have access to less than $800 in a tight spot). Realistically speaking, these kinds of savings can only cover the most inexpensive of emergencies and would still leave anyone who finds themselves in a very unfortunate position – such as long-term illness or loss of work – in a very desperate situation.
Concerns for the Longer Term
A lack of savings also calls into question how we’re faring for retirement, since those of us who aren’t able to make provisions for the next month are much less likely to put significant savings away for the twilight years.
In the West, we’re living longer lives but an alarming number of Americans are putting less and less into their retirement accounts.
According to the US Census, the average amount saved for retirement stands at around $50,000. It’s an easy number to misinterpret, however; it might sound like a lot of money, but given that retirement age can often span two or even three decades, this figure quickly becomes lacking.
In addition, that’s only the mean average saved. In fact, half of all Americans only have $2,000 in retirement savings; a worrying statistic not just on a personal level but for the country as a whole.
When you’re counting down the days to the next paycheck however, it’s very hard to even consider the possibility of making provisions for later life. An improvement of this situation can only occur with sustained political and social change, but at least there is some short-term relief for America’s impoverished in between pay checks. When borrowing from traditional banks is too long-winded a process (or even impossible), payday loans can be a good solution if used responsibly between paychecks. These are often the best, and sometimes only, forms of credit for one-off emergencies that can’t be covered under everyday budgeting.
A Knock-On Effect
In the mean time however, the situation doesn’t look set to change any time soon, and nor is it a new problem – the amount people are putting into savings, or lack thereof, has remained fairly constant over the past three years.
This has a knock-on effect on consumer spending, which has been slipping recently. Until people have more disposable income in their pocket with which to save and to spend, it’d be somewhat premature to expect runaway growth in the economy going forward.