Median American Savings: $0
The typical American isn’t saving anything, according to a new survey, even though we have the capacity to be tucking away extra funds each month.
A report from Interest.com, part of financial website Bankrate.com (NYSE: RATE), finds the median household savings nationwide is zero despite the average American having $668 left over each month after paying their bills.
The site analyzed data from the Bureau of Labor Statistics and found that consumers are spending the leftover cash.
Interest.com studied 18 metro areas nationwide, and found Baltimore has the highest savings opportunity nationwide as the median after-tax income outpaces the area’s typical expenses by $2,021 monthly. This accounts for both essential and discretionary expenses.
Its neighboring city, Washington, D.C., comes in second place, with $1,664 left over per month. Cleveland is in the third spot with $1,294 per month.
Mike Sante, Interest.com managing editor, says given the recent changes surrounding Social Security, dwindling pensions and skyrocketing college debt, Americans should be savvier with their savings, but they are by and large living above their means. However, he says wages are a big part of the issue.
“We’ve had more than a decade of stagnant ages. We hear about the high cost of living in American cities, and Americans are constantly being told to save more,” Sante says. “But are we asking people to do something that is not possible?”
Sante says his team feared finding out that Americans simply had zero dollars left after paying their bills. But instead, they are spending the cash they have left over by adjusting their living habits.
“It’s very easy for people to allow their expenses to expand to take up all of their income. So when people tell you they live paycheck to paycheck but pay all bills and money is gone, it’s true, not just because they are caught in the middle-class squeeze,” he says.
“They are deciding to spend more than median in those cities—more on housing, nicer cars, taking two-week vacations, whatever it might be, they allow expenditures to grow.”
Breaking the habit requires more mindful spending and budgeting. “It’s gratifying to know that median income families, middle- income families are not caught in a hopeless rat race they cannot win. They can live a median middle class lifestyle, but have to make some tough decisions,” he says.