Studies show that wealthy people in the United States are having trouble saving money as well as the “less wealthy”.
No real surpise here to me, but there are those that think rich people are stashing away bags of cash.
Story…
"It's clear from this survey that savings hurdles transcend income levels and that savings requires more discipline than we may realize, regardless of household income," said Kevin Martin, senior vice president, HSBC Bank in the U.S. "The data revealed recurring bills get in the way of saving for the majority of households at both ends of the income spectrum."
The HSBC reports that people with more than $250,000 in household income, who constitute the top 1.5% of U.S. households, report facing many obstacles when it comes to saving. Indeed when HSBC asked what prevents them from saving more, the top answer was the need to pay everyday bills, with 34% of respondents of those who earn more than $250,000 concurring.
The savings rate in the United States dipped to zero in 2005 and has even fallen into negative territory, the first time since the Great Depression.
Financial advisers recommend that people keep three to six months or more of income in a savings account, depending on their financial circumstance. But when people don't save, and over-spend in addition, a precarious financial circumstance evolves where even the slightest snafu in expenses can send them into defaults and bankruptcy.
Over the past two years, default rates on debt payments and bankruptcy rates have soared. Most recently, mortgage fore-closures have sky-rocketed.
It's sometimes assumed that wealthier people are somewhat sheltered from risk of fore-closure or bankruptcy. But just because the numbers may be bigger doesn't mean the financial circumstance may be better.
HSBC found that 49% of respondents with at least $250,000 in income aren't saving more because they simply "want some spending money." In 28% of the cases for those who earn between $100,000 and $250,000 they do not save more because "something unforeseen always comes up." And in nearly one in 10 situations, people who earn $250,000 or more say they aren't even earning "enough to make ends meet as it is."
Were Pre-Conditioned To Spend
Wow. Those statistics are great insight. The serious case of consumerism in the U.S. -- we spend more than twice as much as anyone else in any other country in the world on average per year -- may come back to bite if the economy slips and employment slows.
"Savings can be a challenge at any stage of your life," says Martin. "Regardless of your income, financial status, or age, saving does require a level of control and awareness."
It seems that awareness dims, however, with the more money you earn. More people who earn between $50,000 and $100,000 save consistently than people who earn between $200,000 and $250,000 per year, according to HSBC.
To be sure, there are other things to consider when examining the financial lives of higher income earners. For example, while people who earn more may not be saving more, they may have some type of an investment plan that acts as a surrogate for their savings account. That may be why 74% of people who earn more than $250,000 per year say they save consistently throughout the year. (They save most just before tax time.)
Still, investing aside, saving is a different thing altogether that doesn't always get its due. Talk of hedge funds, sophisticated trading techniques and hot stocks often obscures what should be the gateway to the investing world: the savings account. It shouldn't be minimized or taken for granted. It should be there when times get tough.
These days, I bet a lot more people wish they had a bigger savings account instead of a bigger house.
[Source MarketWatch.com]
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