What goes up, must come down. This basic law of gravity applies to all things on Earth, even consumer savings. According to the latest data, the average saving rate dropped to 9.6% this summer, a significant dip from the historic 33% reached in April 2020.
This rate — which represents the percentage of people’s disposable income that goes into savings — reached a record high during the height of the first lockdown.
With many stores closed for business, people just weren’t spending money like they used to pre-pandemic.
Now, as the country’s COVID recovery rolls out and businesses are reopening their doors, people have begun to feel comfortable spending again. And more consumer spending means less saving.
Not Everyone Found it Easy to Save
For some Americans, the saving rate’s downward spiral makes little difference to their financial lives. That’s because the impressively high saving rate disguises an enormous division in the US.
A Harvard-based research group released a study that shows high-income individuals saved more during the lockdown than low-income individuals. Not only were high-income households earning more on average, but they were also naturally spending more on unnecessary consumer goods and services before the pandemic hit.
Lower-income households had fewer opportunities to save, especially since they faced higher job disruption and wage loss than the upper-middle class.
With fewer financial backups, many low-income individuals had to borrow online loans to supplement their stimulus checks during the pandemic. Some may still need to apply for loans to help them cover unexpected expenses.
Savings Plummet as Inflation Skyrockets
In a see-saw motion, the rate of inflation in the country went up just as the nation’s savings rate went down. Inflation reached 5.4% in July — the highest it has ever been — and experts forecast it won’t level out until sometime in 2022.
As a result, you can expect to pay more on everything — from groceries and clothing to utilities and transportation. These rising prices can be especially challenging after many people emptied their savings accounts to survive the pandemic.
Living without savings leaves you vulnerable to any bump in the road, and unexpected expenses have the power to topple your budget if you don’t take out online loans.
In emergencies, you can compare online direct lenders to find an online loan that may help you cover unanticipated and urgent expenses. Online loans provide a convenient, easy stopgap until you get back on your feet, but they’re only a momentary measure. No online loan can permanently replace the need for savings.
Everyone can benefit from saving more — whether you’re currently repaying loans online or wanting to feel more secure in these volatile times.
Having the cushion of emergency savings means more than just being able to afford the unexpected without borrowing online loans. It gives you the financial security to feel confident about an uncertain future.
Use a Budget to Curb Spending and Save More Money
Your budget tells you exactly how much money you’re spending from month to month. This up-close look at your spending habits might surprise you.
Focus on reducing unnecessary expenses at first. Although it may be hard to give up splurges like takeout, household items, and streaming services, these are easier to cut out than the essentials.
Your budgeting method right now should prioritize these essentials (housing costs, utilities, groceries, etc.), but don’t be afraid to attack these costs, too. If you’re in the position to move, you can slash your housing costs in half and save a ton on your monthly expenditures. You can also try calling your utility providers to negotiate a better plan or financing options.
For most people, groceries represent an easier expense to control. You can reduce what you spend without going hungry by getting crafty in the kitchen, following a strict meal plan, and using apps to find deals.
As the world slowly goes back to normal, so will the savings rate. But with care, you can insulate your budget from overspending and retain as much savings as you need.
Remember this as Thanksgiving approaches. With Black Friday and Cyber Monday deals enticing you to spend money, you’ll have your work cut out for you.