INDIANAPOLIS (WISH) — It is America Saves Week and a good reminder for people to start putting away spare cash. While 2020 hit many people hard financially, more Americans did save during the pandemic.
According to the federal Bureau of Economic Analysis, the U.S. personal savings rate increased from 7.6% in December of 2019 to 20.5% in January of 2021. The latest numbers from January should be released on Friday.
“Some are saving a lot more and others quite a bit less,” said Kyle Anderson an economist at the IUPUI Kelley School of Business.
Economists in Indiana said the spike is because people aren’t out spending as much money. However, the past year highlighted the need for a rainy-day fund.
“Incremental savings is certainly better than not saving at all,” said Andy Crask, the Indianapolis market President of Bank of America.
According to Bank of America, 43% of Americans weren’t able to save as much as they expected in 2020. For people already living paycheck-to-paycheck, the pandemic made just getting by difficult. On the other hand, economists said people who kept their jobs had fewer opportunities to go out and spend money.
“A lot of folks are sitting on more cash,” said Anderson. “We are seeing that increase, but again that is an aggregate number. It doesn’t really reflect what individual households are doing,” said Anderson.
Experts said this is a good time to start saving money. First, people should assess their current financial situation.
“Understand your own situation, needs versus wants, and take a look at whether it is a short-term goal or a long-term goal. You know think about incremental savings. Little things over the course of a long period of time can really add up,” said Crask.
“10% for retirement and then putting another 5% in as kind of a rainy-day fund. So if you could be saving 15%, if you have the flexibility to look at your spending in that way, I think that would really put you in a long-term financially stable situation,” said Anderson.
Financial experts suggest reviewing budgets and spending habits often, especially reoccurring subscription payments. People should knock out any debt, especially if it has a high-interest rate. Most importantly, experts urge people to be ready for an emergency.
“The emergency fund. Having three-to-six months of living expenses on hand,” said Crask. “Really taking an inventory of those real essentials. Your rent, mortgage, your car payment your groceries your utilities and really analyzing what the need is for your own individual situation.”
There are free apps and websites that can help people save. Experts said the federal COVID-19 relief money should be used to keep people afloat. However, if people have the option to set some of that money aside, it could be a great way to start saving.
“From an economist point of view, it’s good for the economy if people go out and spend it. But you know for households it is probably better to save it,” said Anderson.