Americans are running out of savings fast as stimulus payments end across the country.
Stimulus checks are now nowhere to be found after the federal government ended its coronavirus-related economic support payments, and due to this, Americans' savings accounts are fast depleting.
According to the St. Louis Fed, Americans had a 22.7 percent savings rate in 2020. Just two years later, that percentage had fallen to 3.1 before reaching 3.4 percent in September of this year.
"The end of stimulus checks has had a notable impact on the savings landscape for most Americans," Cassandra Happe, a financial analyst at WalletHub, told Newsweek. "With the average savings, individuals face a pivotal juncture."
"Given the current economic landscape, it's evident that financial challenges persist for many Americans," Happe said. "A significant portion of the population is grappling with credit card debt, raising concerns about overall financial health."
Average Savings in America: The Breakdown
Customers use a Bank of America ATM on July 18, 2023, in Daly City, California. The majority of Americans do not have enough money in savings account for them to last three months without a...Customers use a Bank of America ATM on July 18, 2023, in Daly City, California. The majority of Americans do not have enough money in savings account for them to last three months without a job. Justin Sullivan/Getty Images
The average American family may have more than $40,000 in household savings, but a large number have far lower than that in all reality, according to Zippia data.
The job platform found the average American household savings to be $41,600, but the number is heavily skewed by a small number of Americans with heavy savings accounts. The median household savings, on the other hand, is just $5,300.
Happe said job opportunities, employment growth, and regional economic conditions all play a crucial role in shaping individual savings habits.
A significant 10 percent, or 25 million Americans have absolutely no savings at all as states end their specific stimulus rebate programs and the U.S. economy stares down a potential recession.
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After that, 58 percent of Americans have less than $5,000, while 42 percent don't even have $1,000 saved for a rainy day. On the other end, 20 percent of Americans said they had more than $50,000.
"With the majority of Americans falling in these categories is a sign that our citizens are in financial dire straits, and they would likely not be able to survive a week when facing a job loss," Robin Snell, the owner and chief of planning at Nested Financial, told Newsweek.
Older Americans have had more time to save some cash in the bank, as those aged 45 to 54 had $50,590 more than the average person under 35, according to the Federal Reserve's 2022 Survey of Consumer Finances.
Those under 35 had an average savings balance of $20,540, while those 45 to 54 had $71,130, granted the averages are far higher than the median due to those with the highest savings.
The savings account data reflected a racial wealth gap as well, as the average white respondent had $80,040 in savings compared to just $13,370 for Black Americans and $15,710 for Hispanics.
Education was also a huge deal breaker when it came to how adequately Americans had saved, with those who never received a high school diploma reporting an average of $9,130 and college-educated Americans reporting more than $116,000.
Job Loss
Those who have even the average amount of savings would face severe challenges if they lost their jobs tomorrow, Happe said, as the money would provide only a limited buffer.
"Americans face a precarious financial situation with the potential to plunge into bankruptcy if they lose their jobs," Happe said.
While most financial advisers recommend holding savings at an amount of at least 3 to 6 months of household expenses, most Americans have far below that.
Based on the average cost of housing, utilities, insurance, groceries and credit card minimum payments, most Americans would need at least around $7,500 to cover three months of expenses, according to Bethany Hickey, a banking and personal finance expert at Finder.
Say you do have at least $7,500, you still may not have enough for other expenses, like your phone, subscriptions, car payments or childcare.
Even if you lived in a state like Mississippi, which has one of the cheapest costs of living at $32,336, you'd likely be bankrupt within just three months without any severance or unemployment benefits.
Since the unemployment rate for October rests at just 3.8 percent, the odds look better for finding a new job. But many Americans are dealing with heavy credit card debt as well, with totals estimated at $1.2 trillion nationally.
"The average savings account balance in America is dismal," Andrew Powers, an Illinois-based registered investment advisor, told Newsweek.
"Wages have not kept up with inflation and we are a nation that likes to 'keep up with the Joneses' which typically requires overspending," Powers said. "Losing a job would be financially catastrophic for most."
