Some savings statistics

A few articles ago I mentioned offhand that the average US personal savings rate is a shameful 1%. Had I bothered to research it, I’d have found that it’s up 3.5%, according to the St. Louis Fed. That means the average “consumer unit” saves about $2,200 per year. Not bad, but it makes the following fact even more startling:

The National Foundation for Credit Counseling finds that 64% of Americans would have to go into debt or sell off possessions to cover a $1,000 emergency, due to lack of savings. That’s just $1,000! If you’ve ever been to the ER, you know how far $1,000 gets you. (A bandaid)

Here’s another scary one:

42% of workers surveyed by the Employee Benefit Research Institute haven’t calculated how much money they will need in retirement, and say they simply guessed at the figure.

This is surprising to me because what might be the most important thing for you to know about your financial future is pretty easy to figure out.

AARP has the best retirement planning calculator on the internet. Don’t laugh. If you’re anything like the Americans surveyed above, you’ll probably be eligible to join AARP long before you’ve saved enough to retire!

I’m not posting this stuff to scare or depress you, but to let you know how easy it is to not be a statistic. Figure out your long-term financial goals. Make an emergency fund. Spend consciously (less than you earn) on things that bring you value and happiness.

Background for this article: I saw some facts like this on reddit, but with no sources listed. I decided to find the sources instead of just copy/pasting it onto here.

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Update on Cost of Food

In my last (non-auto-generated) post, I wrote about the disparity between two different methods of tracking grocery costs, one from the USDA and one from the Consumer Expenditure Survey.

I heard back from Mark Lino, Senior Economist at the USDA, and he cleared things up. The difference is simple:

USDA assumes all meals are eaten at home, while the CE survey tracks actual spending habits (I’m guessing every American eats out at least one time per month). I’m not trying to fault Lino or the USDA, since their job is to figure out the most thrifty way to put an optimal amount of nutritious food in your body for a month. After all, their data are what the Food Stamps program is based on.

So to compare apples-to-apples, take a look at the actual food spending of the 2.5 person “unit” in the CE survey, compared to the USDA monthly food budget (adjusted to 2.5 people):

CE Survey: $510.75
USDA: $435.63

The data would suggest that the average person could save only $30 a month if they never went out to eat. Is that worth it? As the husband of a “foodie” who loves trying new and adventurous dishes, it’s definitely not worth the savings.

This gets to the heart of what being frugal is all about. As The Simple Dollar put it so succinctly last week, frugality isn’t about squeezing every penny out of everything. It’s about maximizing the value of the things you’re doing, and “value” doesn’t always mean “money.”