Skimpy Savings: Why It’s Not Just a Low-Income Problem


It probably wouldn’t shock anyone to learn that low-income Americans are having trouble saving money.

But when it comes to stashing away cash, those who are comparatively well-off actually aren’t doing much better.

According to a new report by the Federal Reserve, less than half of American upper-middle-class households—those making between $75,000 and $99,999 annually—saved any money whatsoever in 2012. In fact, 16% said they spent more than they earned that year—landing themselves in debt.

Even worse: Just half of those upper-middle-class households had previously socked away enough savings to live on for three months in the event of an emergency. When asked how they would pay for an unexpected $400 expense, more than 20% said they’d use a credit card and slowly pay it off.

These attitudes aren’t just lingering effects of the recession. A quick look at data from the Survey of Consumer Finances reveals that, even in the mid-2000s, 30% of upper-middle-class households weren’t saving money. And, just before the recession hit in 2007, households in this group had a median of just $7,000 saved up—or less than one month’s income for a $90,000 earner.

So what’s behind this group’s reluctance to save? For one thing, writes Allison Schrager at Bloomberg Businessweek, Americans might have been less inclined to save during times when credit and home equity loans were readily available. Similarly, keeping an emergency fund probably didn’t seem that important when unemployment rates were relatively low.

But Americans put themselves in a highly precarious position when they skimp on savings. As Schrager suggests, the recession hit families (of all income levels) even harder because they didn’t have much of a safety net to fall back on. And unfortunately, given the scary savings data from 2012, it would seem as though we haven’t really learned our lesson.

Inspired to start plumping up your financial cushion? Take the first step by learning the top savings mistakes to avoid—like buying fancy savings products and saving without a concrete goal in mind.

  • R

    What gives???? the unanswered overlooked option D after this default c. Mid wage earning americans are often some of the most highly indebted from hmmm… STUDENT LOANS they took out to afford the comfortable job salary. In a recession, many of those earners also were laid off, living off of their saved earnings, and many catching up with bills established before the economy went bust. It seems less a reluctance to save and more a what is left to save BIG when your income meets your outgoing debt. After job downsizing, lower wages paid out, and inflation.

  • Ashley Young

    Making $75,000 per year isn’t really $75,000 per year. It’s actually more like $48,750. If you live in a metro area like most people making this amount of money, a little under half of your net income goes toward rent (12*$1600 for a *cheap* 1 bedroom apartment) and then most of the rest goes toward all of your other expenses like food, transportation, student loans, other debt payments, and various necessities like cleaning supplies and paper products. It’s the price you pay for living somewhere you can earn more and it’s a little ironic.