Plainsboro (New Jersey) [USA], June 2 (ANI / PNN): Have you been hiding your money lately? Well, you are not alone. The current pandemic has caused America to save more, resulting in an unusually high personal savings rate.
The personal savings rate – the amount people save as a percentage of personal disposable income – rose 23.2 percent in May, according to new data released Friday by the US Bureau of Economic Analysis. In April, the personal savings rate, or the percentage of people’s income left over after paying taxes and spending money, climbed 32.2%. Last year, during the same period, the personal savings rate was in single digits, around 7.8 to 8%.
The unusually high personal savings rate is the result of a lack of discretionary spending opportunities, job losses, pay cuts, a change in spending habits and a red flag for build up an emergency fund. Did you know that currently 60% of American families have little or no savings? Only about 40% of the country’s families can afford an unexpected expense of more than $ 1,000. Almost 80 percent of people live paycheck after paycheck in America.
The pandemic has exposed the loopholes in managing American household money without putting anything aside for a rainy day. Now, it’s more important than ever to have an emergency fund – money that you can access in an emergency.
An unforeseen event such as job loss, pay cuts and a medical emergency can tip your financial basket. Now is the right time to change your financial behavior from spending to saving. If you’re a millennial or Gen Z and want to save money despite having a lower income, you can start by setting aside a small amount. The power of composition can help you build a body for your future. While your upward savings path may be a solid foundation for your financial health, it is hurting the spending-driven US economy.
If you need money and don’t have savings, banks and financial institutions offer cheaper loans. In fact, the $ 2 trillion stimulus injected by the government encourages Americans to take cheap loans and spend more.
However, don’t be lured into cheap loans and borrow for unnecessary or discretionary expenses as this will have an additional impact on your financial health and credit score. If you have no other alternative but to take out a loan, do your math before choosing it. The latest data on consumer spending, showing a rebound, indicates that the economy is showing signs of recovery, but still looms under declining incomes and increasing cases of coronavirus.
Considering the current scenario, your mantra should be: Save first, spend later.
(The author is Jamir Savla who is an experienced advisor in wealth and asset management technology) This story is provided by PNN. ANI will not be responsible for the content of this article in any way. (ANI / PNN)