Fast Facts: America Saves Week
Each year since 2007, America Saves Week, coordinated by America Saves and the American Savings Education Council, has been an opportunity for many organizations to participate in the education of employees and consumers on the importance of personal savings.
The US savings rate has been steadily on the rise since September 2012, reaching 6.5% at the close of the year.
The savings rate was on a downward trend for 23 years until 2008, when consumers tightened their budgets in response to the recession.
The average savings rate from 2000-2007 was 2.8%
The Consumer Federation of America’s annual savings report found that only half of Americans think they are prepared for the future or are saving for retirement.
The FDIC recommends planning for life events and emergencies early. An emergency savings fund of 3-6 month’s income is a good way to cover unforeseen events like job loss or car repairs.
The Principal Financial Group’s retirement readiness program projects workers need to save 11-15% of total income over the course of their career to maintain a desired standard of living.
When planning for retirement, learn what your social security benefits will be and use an online calculator to budget your savings each month.
Many employers offer automatic savings or retirement contribution plans. Participating in these programs may be the easiest way to save, with a percentage of income automatically invested or transferred to an account to compound interest.
Some states and employers have begun using an automatic savings plan where a worker would have to choose to opt out of the program, rather than opt in.
By 2002, all states had developed Section 529 college savings plans to encourage saving for higher education. In 2011, the value invested in those accounts rose to $165 billion.
529 plans can either be set up as savings plans to be used for various college expenses or a prepaid tuition plan, where savers can purchase units or credits at participating colleges for future tuition.
Investing in a 529 plan often provides tax benefits, but will reduce eligibility for need-based financial aid. If a child or beneficiary of these plans decides not to attend college, funds they remove from the account will be subject to tax.