By Kirsten Longnecker
Despite hurdles and economic shifts, Americans are persistent, and they still have a strong desire to save money. That’s one of many insights from a survey our Plinqit team commissioned by The Harris Poll to provide insights into the savings habits of Americans. Which have changed over the years, and our survey shows some ways banks can approach consumer habits into the future.
Savings priorities vary by generation
For bankers, understanding the challenges the changing environment presents is fundamental to adapting existing services to meet evolving customer needs. Take, for example, the findings of a Bankrate survey: Half of Americans have reported that their personal finances have taken a hit since the pandemic. On top of that, personal savings rates have fallen, according to The Federal Reserve, and many consumers are struggling to get by due to inflated housing costs, high prices of everyday goods and reduced purchasing power.
And yet 90 percent of Americans report that they are saving for something this year, according to Plinqit’s 2024 State of Savings report. The report is based on a recent survey conducted by The Harris Poll of more than 2,000 U.S. adults ages 18 and older.
Overall, the top categories that Americans are saving for this year included travel (45 percent), paying down/off debt (41 percent) and emergency funds (36 percent). However, there are striking differences between generations when it comes to savings priorities.
Debt is one category that exemplifies this.
Recent data from Experian shows that millennials’ credit card balances have increased more than those of other generations, by more than 15 percent in the last quarter of 2023, compared to the previous year. Generation Z is close behind with a 14 percent increase in credit card balances.
The report reflects this, as Gen Z (ages 18-27), millennials (ages 28-43) and even Generation X (ages 44-59) are all more likely to say they are saving to pay down or off debt this year. Just 34 percent of baby boomers (ages 60-78) report saving to pay down/off debt compared to 43 percent of Gen Z, 47 percent of millennials and 45 percent of Gen X.
Emergency funds and retirement funds also highlight differences among the generations. The report reveals that millennials are more likely than their older counterparts to say that they are saving for an emergency fund, at 41 percent (compared to 33 percent of Gen X and 35 percent of baby boomers). Gen X, on the other hand, is the generation most likely to be saving for retirement this year (40 percent vs. 17 percent Gen Z, 33 percent millennials and 32 percent baby boomers), which is likely due to where members of this generation is on their career journeys.
Different generations also save different portions of their income each month.
Overall, a majority of Americans (69 percent) say they save 20 percent or less of their monthly household income and 43 percent say they save 10 percent or less. Only about one in four Americans (28 percent) say they save more than 20 percent of their monthly household income. Boomers and Gen X are the least likely to say they save more than 20 percent of their income (18 percent and 17 percent vs. 47 percent of Gen Z and 36 percent of millennials). Gen Z is the generation with the highest propensity to save more than 20 percent of income.
Why is this important?
When people are in a position to have to decide what to pay for while also trying to determine how much they can reasonably stash away, that’s where having a relationship with a bank can be a saving grace, especially when it comes to choosing a savings product.
The survey data show that this is an area in particular where many U.S. adults can use help.
The opportunity for banks
Although nearly all respondents (96 percent) say they are saving money, nearly half of Americans save their money in a checking account (48 percent) or a traditional savings account (46 percent) while only one in five (20 percent) uses a high-yield savings account. Yet, the top high-yield savings accounts offer an APY of 5 percent or greater – more than 10 times greater than the average rate of a traditional saving or checking account, according to FDIC data. Clearly this is an area where financial institutions can help educate customers on ways to save smarter, not harder.
At a time when competition for deposits is fierce, it’s positive news for bankers that consumers want to save. However, consumers must be informed, educated and literate when it comes to understanding and managing their personal finances, especially in today’s high interest rate environment.
Many Americans may be managing their money in a high-rate economy for the first time ever, and this can influence decisions they make regarding their spending, saving and investment habits.
Debt balances are rising, and that is a challenge banks can help customers manage.
Financial institutions are the light at the end of this tunnel. Banks that prioritize providing educational resources, coupled with compelling savings vehicles, will meaningfully empower customers, especially younger generations, on their personal finance journeys.
Kirsten Longnecker is chief marketing officer at Plinqit.
