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Interesting, how does `Americans stashed away an average 8.3%` compare to the often stated ~50% have no emergency fund/savings. Does that mean those saving mon

Interesting, how does `Americans stashed away an average 8.3%` compare to the often stated ~50% have no emergency fund/savings. Does that mean those saving money are on average saving %16 of their income? Makes sense from a general bell curve/inequity point of view but just looking for some thoughts.

SoftTalker 3y ago
The usual advice is to save at least 10%. First, that goes into your emergency fund. Once that is adequate, start investing for longer term goals/retirement. This requires you to have the discipline to not spend your emergency fund on Christmas shopping. It's for emergencies.
- coldbrewed 3y ago
  While it's true that the financial discipline needed to protect an emergency fund isn't as prevalent as it should be, it's important to remember that an emergency fund only lasts if you don't experience an emergency. From 2017-2022 we had a pandemic that caused an enormous number of personal emergencies; between layoffs, inflation, disease, death, and all of the associated costs it's safe to say that a lot of people may have wiped out their emergency fund just trying to survive.
  - nradov 3y ago
    It would be more accurate to say that government mismanagement of and irrational overreaction to the pandemic caused most of the financial emergencies.
  - bcrosby95 3y ago
    Our emergency fund is more of a "shit happens" fund. Shit happens every year. $2k to fix the car. $10k to fix the leaky roof. $4k in emergency dental work. And that was just this year.
    - cableshaft 3y ago
      Yeah. ~$10k in costs and repairs after a flooded basement on January 1st this year, ~$5k to get a new roof (I'm guessing, we were going to do that after the flooded basement is done, and that's still in progress). >$15k for implants/new bridge I've been saving up for for two years (while my uncovered teeth have been slowly decaying over there), and now I discovered I might have to get my other bridge replaced if there's any issues with a root canal I'm getting tomorrow, so possibly another sudden $5k+ I didn't expect. Also we somehow owed over $6000 in taxes this year despite me increasing how much money was set aside each paycheck by $250 per paycheck after the same thing happened the previous year. We still have an emergency savings, but wow is life working hard to keep depleting it. There's a chance I might have to liquidate some investments to pay for everything this year.
      - bcrosby95 3y ago
        You mentioned a basement so I assume you don't live in California. My neighbor here had his roof replaced with among the lowest quality options and it costed him $25k - around here $5k wouldn't get you much.
        cableshaft 3y ago
        I'm hoping insurance covers a decent amount of it. We've had a lot of strong storms in the area the past couple of years. I know neighbors on my street that haven't paid that much to get their roof replaced. And yeah, I'm in the Midwest, not California. If insurance doesn't cover it, I'm expecting to pay over $10k for the roof.
      - DANmode 3y ago
        Couldn't pay me a million dollars per year to live in a home with water damage - especially in the basement. Doubly so if the HVAC system's intake is down there.
        deleted 3y ago
        [deleted]
stouset 3y ago
Yeah, something like that. I think there’s a very bimodal distribution here. A lot of people save absolutely nothing. Some of those have no choice in the matter but many do but lack the discipline, motivation, and/or desire to do so. Anyone who finds it important and has the means to do so is—in general—likely saving more than a token amount. 10% is a good start and enough to be noticeably worth the effort. And then of course you have the FI/RE crowd who (while rarer) push their savings to anywhere from 30–50%, or even higher.
- causi 3y ago
  Right. I work somewhere that has a lot of seasonal overturn and the number of people who live check to check while displaying astonishing conspicuous consumption is very high. Guys who walk around with a new Galaxy Fold 5 and drive a caddy who freak out if their check is a day late.
- ianburrell 3y ago
  Another thing is that a lot of people contribute to 401k and other retirement plans. Those can’t be used for bills but count as savings. Also, a lot of people have equity in their homes. I don’t know if that counts as savings, but is money that can be accessed with HELOC or sale.
  - nradov 3y ago
    Right, those studies and surveys often have very limited and meaningless definitions of "savings". Sometimes they only count cash in a bank account. But ultimately it's net worth that really matters, perhaps with some adjustment for liquidity.
- 303uru 3y ago
  Absolutely a bimodal distribution. I wonder how it lines up with income? Anecdotally, my wife and I are high earners but we really haven't changed much in our lifestyle between early in our careers and now. Same house, same paid off cars, etc... A large percentage of our income shuttles into emergency fund, 401ks, backdoor roth, HSA, SEP IRA, and then DCA'd into traditional investments. I honestly don't even think about my spending or savings, we're well within our means and it just happens. We have friends and acquaintances in the same income bracket and many are leveraged to the gills, don't fund their 401k, don't have any emergency savings, etc... Hell, they're often using margin for risky investments.
whimsicalism 3y ago
50% stats are based on self-reporting, 8.3% is likely based on financial flows data.
dotnet00 3y ago
That 50% number is, IIRC a popular misinterpreted statistic. The statistic came from phone interviews asking how people would cover a $1000 emergency expense, where ~45% said they'd pay from savings. This got twisted into "~55% don't have enough savings to pay a $1000 emergency expense". But, the second most popular option was to pay via credit card, and this does not preclude having the money in savings. Given the popularity of credit cards in the US, this makes sense too. If faced with a sudden large expense, I too would put it on credit and pay it off at the end of the cycle instead of pulling from savings, despite being able to afford the latter. Similarly, the third most popular option was to pay the bill and cut other expenses, which also doesn't exclude savings and would be a pretty normal thing to do too. IIRC only ~15% said they'd take a loan or borrow from friends/family.
- adamsb6 3y ago
  The more shocking the headline, the more important to interrogate primary sources.
  - lotsofpulp 3y ago
    Just throw out any statistic that does not offer distribution information. Quintiles should be the minimum standard, but deciles are preferable.
  - rayiner 3y ago
    Similar example: https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1154&context=faculty_publications https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=... > Lawmakers who opposed the bankruptcy bill cited a 2005 study by Himmelstein, Thome, Warren, and Woolhandler finding that approximately half of bankruptcies were medical-related. Supporters of the bankruptcy bill countered with a court record analysis conducted within the Department of Justice (DOJ). According to the DOJ analysis, over half of the sample (54%) had no medical debt at all, the average medical debt among those with any such debt was under $5,000, and medical debt comprised only 5.5% of the total unsecured debt of the sample.
- happytiger 3y ago
dmoy 3y ago
Average median vs average mean The median US household entering retirement age has saved about $120k-$150k. That is, over 50% of people are more or less 100% reliant on social security to get by in retirement. The mean US household savings at retirement age is like closer to $500k, because it's overwhelmingly top heavy in the 1%/0.1%/etc of people.
pb7 3y ago
>the often stated ~50% have no emergency fund/savings Consider that this reporting is/was complete bullshit intended to get clicks. More critically, that headline gobbled up answers like "I would put this expense on a credit card" into "people have no savings to pay for things" when it's extremely common for people to pay for things with a credit card and have 30 days to settle their balances for the month.
creer 3y ago
Especially in America, savings, investments, income, age-restricted versions of all the above - are all over the map. From near zero to stratospheric - including for example near zero income paired with high investments. On top of it all, the statistics usually ignore pensions - for extra difficulty in comparing anything to anything. In general means and such are pretty irrelevant except maybe to raise alarms in yr to yr comparisons. We often hear this "all over the map" blamed on the "1%" (that's a lot of people in the US). Not so. A police officer is not expected to be a rich career, but it's one where it's easy to put in lots of high-paid overtime and like in any other job, invest a lot from early on. It's a short career that leaves time for a second one afterwards. It's easy to finish with a high pension in addition to high investment. Obviously not all cops will do that but it's possible. Investing is also well understood by many people so you see teachers ending up with very nice piles. Nothing to do with "1%" or income inequality.
- DonnyV 3y ago
  " you see teachers ending up with very nice piles" - wtf are you smoking, teachers are massively under paid. On top of that they have to pay for their own supplies and they're medical keeps being raised. The benefits they once got aren't there anymore. On the other hand cops are way over paid. Put since they protect the properties of the 1%, the elites never complain about them.
  - jandrewrogers 3y ago
    Median teacher's pay in the US is roughly the median pay for someone with a college degree in the US. I am not sure how one could get to "massively underpaid" from that. Teaching doesn't stand out as being unusually difficult or requiring exceptional skill.
    - creer 3y ago
      Also how you end up in (net worth / spending rate) is as much a result of how much you earn as what fraction of that you invest; How modest you keep your living expenses; How early you start; How well you can learn and keep up with investment reading and math requirements; And luck. Being a teacher may well predispose you with several of these. The US make it also easy - well, maybe not easy but not uncommon - for a cliché "Wall Street lawyer" to end up broke. We were discussing the awesome breadth in outcome in the US.
VirusNewbie 3y ago
Another misconception is the 'live pay check to paycheck' statistics that are floating around, which isn't really well defined. I know many people who live 'paycheck to paycheck' simply because well, after maxing their 401k, they spend all their money every month. Doesn't mean they couldn't cut back if they needed to, or tap into a large 401k (and pay a penalty) but it's not like they're destitute.
- samsolomon 3y ago
  I get what you're saying, but I don't really think this counts as living paycheck to paycheck. This is just reverse budgeting. Heck, I do the same thing. I have a predefined amount that goes into my various accounts each paycheck. The rest is used for the mortgage, bills, other monthly expenses, etc... It is much easier to adjust your 401k, Roth, HSA and Brokerage account transfers than to get a raise.
  - ryandrake 3y ago
    It's the Warren Buffet quote: “Do not save what is left after spending, but spend what is left after saving.” I don't even see the money that goes into my savings--it happens automatically before I even get paid. What's left over is a small, small percentage of my actual after-tax pay, and that has to somehow stretch to the next paycheck, which is not always easy.
- bluGill 3y ago
  If your 401k is maxed out it is probably wrong to save anything more in general. Maybe you are planning an expensive vacation so you save for a few months, and everyone should save a small emergency fund. However there is no reason to think you will live to see tomorrow and if you are one of the unlucky who don't wake up again any savings will be lost. A 401k is for most the right level of compromise unless you start late in life a maxed 401k is probably slightly too much savings. If you have the 401k maxed it is time to start living on whatever money is left - buy toys you will enjoy, donate to a good cause, I don't care, but if there is money left over after paying for normal life enjoy it as you can't take it with you (see religion for possible exceptions - you get to figure that out on your own)
saghm 3y ago
Is the article saying "average" as in mean or median? It's hard for me to imagine that the mean would be particularly meaningful, since the wealthiest people not spending billions of dollars per year seems like it would offset an enormous chunk of people with no savings whatsoever, but it's also hard for me to imagine that a statistic from a publication not making the distinction explicit would be both competent enough to know which to use and unscrupulous enough not to try to exploit the ambiguity. If this is the median, I'd be similarly curious to you, but if it's the mean, I don't feel like I know the total sum of all incomes in the US with high enough precision to gauge whether 16% is more or less reasonable than 6% or 26%.
- spullara 3y ago
  For government statistics it is almost always median. Means are really bad in economics discussions as you point out.
francisofascii 3y ago
I have a family member who does financial planning for high net worth people. She says these people's savings rates have been through the roof. My guess is these people are throwing off the average.
- ryandrake 3y ago
  I mean, it makes sense. Unless you are living some extravagant lifestyle, beyond a certain point, income just gets hoarded straight into savings. If I made $1M a year, I wouldn't even be able to spend it if I wanted to. I couldn't think of anything to do with that money besides invest it somewhere or give it away. There are a lot of these doctors, lawyers, and corporate executives who make more money than they could possibly spend, so of course it all just gets slammed into savings.
  - testval121 3y ago
    [dead]
- sokoloff 3y ago
  A lot of money can be/is spent on travel and vacations. For the last several years, the picture on that has changed significantly, for my own account meaning fewer international vacations, less domestic travel to see family, and a dramatic reduction in eating in restaurants (which is really expensive compared to cooking at home). I'm not high-net worth, but I suspect that a lot of the same vacation forces are at play in that community as well, particularly during the pandemic.
Clent 3y ago
Does that 8.3% include retirement savings to a 401k?

SoftTalker 3y ago

The usual advice is to save at least 10%. First, that goes into your emergency fund. Once that is adequate, start investing for longer term goals/retirement. This requires you to have the discipline to not spend your emergency fund on Christmas shopping. It's for emergencies.

coldbrewed 3y ago
While it's true that the financial discipline needed to protect an emergency fund isn't as prevalent as it should be, it's important to remember that an emergency fund only lasts if you don't experience an emergency. From 2017-2022 we had a pandemic that caused an enormous number of personal emergencies; between layoffs, inflation, disease, death, and all of the associated costs it's safe to say that a lot of people may have wiped out their emergency fund just trying to survive.
- nradov 3y ago
  It would be more accurate to say that government mismanagement of and irrational overreaction to the pandemic caused most of the financial emergencies.
- bcrosby95 3y ago
  Our emergency fund is more of a "shit happens" fund. Shit happens every year. $2k to fix the car. $10k to fix the leaky roof. $4k in emergency dental work. And that was just this year.
  - cableshaft 3y ago
    Yeah. ~$10k in costs and repairs after a flooded basement on January 1st this year, ~$5k to get a new roof (I'm guessing, we were going to do that after the flooded basement is done, and that's still in progress). >$15k for implants/new bridge I've been saving up for for two years (while my uncovered teeth have been slowly decaying over there), and now I discovered I might have to get my other bridge replaced if there's any issues with a root canal I'm getting tomorrow, so possibly another sudden $5k+ I didn't expect. Also we somehow owed over $6000 in taxes this year despite me increasing how much money was set aside each paycheck by $250 per paycheck after the same thing happened the previous year. We still have an emergency savings, but wow is life working hard to keep depleting it. There's a chance I might have to liquidate some investments to pay for everything this year.
    - bcrosby95 3y ago
      You mentioned a basement so I assume you don't live in California. My neighbor here had his roof replaced with among the lowest quality options and it costed him $25k - around here $5k wouldn't get you much.
      - cableshaft 3y ago
        I'm hoping insurance covers a decent amount of it. We've had a lot of strong storms in the area the past couple of years. I know neighbors on my street that haven't paid that much to get their roof replaced. And yeah, I'm in the Midwest, not California. If insurance doesn't cover it, I'm expecting to pay over $10k for the roof.
    - DANmode 3y ago
      Couldn't pay me a million dollars per year to live in a home with water damage - especially in the basement. Doubly so if the HVAC system's intake is down there.
      - deleted 3y ago
        [deleted]

stouset 3y ago

Yeah, something like that. I think there’s a very bimodal distribution here. A lot of people save absolutely nothing. Some of those have no choice in the matter but many do but lack the discipline, motivation, and/or desire to do so. Anyone who finds it important and has the means to do so is—in general—likely saving more than a token amount. 10% is a good start and enough to be noticeably worth the effort. And then of course you have the FI/RE crowd who (while rarer) push their savings to anywhere from 30–50%, or even higher.

causi 3y ago
Right. I work somewhere that has a lot of seasonal overturn and the number of people who live check to check while displaying astonishing conspicuous consumption is very high. Guys who walk around with a new Galaxy Fold 5 and drive a caddy who freak out if their check is a day late.
ianburrell 3y ago
Another thing is that a lot of people contribute to 401k and other retirement plans. Those can’t be used for bills but count as savings. Also, a lot of people have equity in their homes. I don’t know if that counts as savings, but is money that can be accessed with HELOC or sale.
- nradov 3y ago
  Right, those studies and surveys often have very limited and meaningless definitions of "savings". Sometimes they only count cash in a bank account. But ultimately it's net worth that really matters, perhaps with some adjustment for liquidity.
303uru 3y ago
Absolutely a bimodal distribution. I wonder how it lines up with income? Anecdotally, my wife and I are high earners but we really haven't changed much in our lifestyle between early in our careers and now. Same house, same paid off cars, etc... A large percentage of our income shuttles into emergency fund, 401ks, backdoor roth, HSA, SEP IRA, and then DCA'd into traditional investments. I honestly don't even think about my spending or savings, we're well within our means and it just happens. We have friends and acquaintances in the same income bracket and many are leveraged to the gills, don't fund their 401k, don't have any emergency savings, etc... Hell, they're often using margin for risky investments.

whimsicalism 3y ago

50% stats are based on self-reporting, 8.3% is likely based on financial flows data.

dotnet00 3y ago

That 50% number is, IIRC a popular misinterpreted statistic. The statistic came from phone interviews asking how people would cover a $1000 emergency expense, where ~45% said they'd pay from savings. This got twisted into "~55% don't have enough savings to pay a $1000 emergency expense". But, the second most popular option was to pay via credit card, and this does not preclude having the money in savings. Given the popularity of credit cards in the US, this makes sense too. If faced with a sudden large expense, I too would put it on credit and pay it off at the end of the cycle instead of pulling from savings, despite being able to afford the latter. Similarly, the third most popular option was to pay the bill and cut other expenses, which also doesn't exclude savings and would be a pretty normal thing to do too. IIRC only ~15% said they'd take a loan or borrow from friends/family.

adamsb6 3y ago
The more shocking the headline, the more important to interrogate primary sources.
- lotsofpulp 3y ago
  Just throw out any statistic that does not offer distribution information. Quintiles should be the minimum standard, but deciles are preferable.
- rayiner 3y ago
  Similar example: https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1154&context=faculty_publications https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=... > Lawmakers who opposed the bankruptcy bill cited a 2005 study by Himmelstein, Thome, Warren, and Woolhandler finding that approximately half of bankruptcies were medical-related. Supporters of the bankruptcy bill countered with a court record analysis conducted within the Department of Justice (DOJ). According to the DOJ analysis, over half of the sample (54%) had no medical debt at all, the average medical debt among those with any such debt was under $5,000, and medical debt comprised only 5.5% of the total unsecured debt of the sample.
happytiger 3y ago

dmoy 3y ago

Average median vs average mean The median US household entering retirement age has saved about $120k-$150k. That is, over 50% of people are more or less 100% reliant on social security to get by in retirement. The mean US household savings at retirement age is like closer to $500k, because it's overwhelmingly top heavy in the 1%/0.1%/etc of people.

pb7 3y ago

>the often stated ~50% have no emergency fund/savings Consider that this reporting is/was complete bullshit intended to get clicks. More critically, that headline gobbled up answers like "I would put this expense on a credit card" into "people have no savings to pay for things" when it's extremely common for people to pay for things with a credit card and have 30 days to settle their balances for the month.

creer 3y ago

Especially in America, savings, investments, income, age-restricted versions of all the above - are all over the map. From near zero to stratospheric - including for example near zero income paired with high investments. On top of it all, the statistics usually ignore pensions - for extra difficulty in comparing anything to anything. In general means and such are pretty irrelevant except maybe to raise alarms in yr to yr comparisons. We often hear this "all over the map" blamed on the "1%" (that's a lot of people in the US). Not so. A police officer is not expected to be a rich career, but it's one where it's easy to put in lots of high-paid overtime and like in any other job, invest a lot from early on. It's a short career that leaves time for a second one afterwards. It's easy to finish with a high pension in addition to high investment. Obviously not all cops will do that but it's possible. Investing is also well understood by many people so you see teachers ending up with very nice piles. Nothing to do with "1%" or income inequality.

DonnyV 3y ago
" you see teachers ending up with very nice piles" - wtf are you smoking, teachers are massively under paid. On top of that they have to pay for their own supplies and they're medical keeps being raised. The benefits they once got aren't there anymore. On the other hand cops are way over paid. Put since they protect the properties of the 1%, the elites never complain about them.
- jandrewrogers 3y ago
  Median teacher's pay in the US is roughly the median pay for someone with a college degree in the US. I am not sure how one could get to "massively underpaid" from that. Teaching doesn't stand out as being unusually difficult or requiring exceptional skill.
  - creer 3y ago
    Also how you end up in (net worth / spending rate) is as much a result of how much you earn as what fraction of that you invest; How modest you keep your living expenses; How early you start; How well you can learn and keep up with investment reading and math requirements; And luck. Being a teacher may well predispose you with several of these. The US make it also easy - well, maybe not easy but not uncommon - for a cliché "Wall Street lawyer" to end up broke. We were discussing the awesome breadth in outcome in the US.

VirusNewbie 3y ago

Another misconception is the 'live pay check to paycheck' statistics that are floating around, which isn't really well defined. I know many people who live 'paycheck to paycheck' simply because well, after maxing their 401k, they spend all their money every month. Doesn't mean they couldn't cut back if they needed to, or tap into a large 401k (and pay a penalty) but it's not like they're destitute.

samsolomon 3y ago
I get what you're saying, but I don't really think this counts as living paycheck to paycheck. This is just reverse budgeting. Heck, I do the same thing. I have a predefined amount that goes into my various accounts each paycheck. The rest is used for the mortgage, bills, other monthly expenses, etc... It is much easier to adjust your 401k, Roth, HSA and Brokerage account transfers than to get a raise.
- ryandrake 3y ago
  It's the Warren Buffet quote: “Do not save what is left after spending, but spend what is left after saving.” I don't even see the money that goes into my savings--it happens automatically before I even get paid. What's left over is a small, small percentage of my actual after-tax pay, and that has to somehow stretch to the next paycheck, which is not always easy.
bluGill 3y ago
If your 401k is maxed out it is probably wrong to save anything more in general. Maybe you are planning an expensive vacation so you save for a few months, and everyone should save a small emergency fund. However there is no reason to think you will live to see tomorrow and if you are one of the unlucky who don't wake up again any savings will be lost. A 401k is for most the right level of compromise unless you start late in life a maxed 401k is probably slightly too much savings. If you have the 401k maxed it is time to start living on whatever money is left - buy toys you will enjoy, donate to a good cause, I don't care, but if there is money left over after paying for normal life enjoy it as you can't take it with you (see religion for possible exceptions - you get to figure that out on your own)

saghm 3y ago

Is the article saying "average" as in mean or median? It's hard for me to imagine that the mean would be particularly meaningful, since the wealthiest people not spending billions of dollars per year seems like it would offset an enormous chunk of people with no savings whatsoever, but it's also hard for me to imagine that a statistic from a publication not making the distinction explicit would be both competent enough to know which to use and unscrupulous enough not to try to exploit the ambiguity. If this is the median, I'd be similarly curious to you, but if it's the mean, I don't feel like I know the total sum of all incomes in the US with high enough precision to gauge whether 16% is more or less reasonable than 6% or 26%.

spullara 3y ago
For government statistics it is almost always median. Means are really bad in economics discussions as you point out.

francisofascii 3y ago

I have a family member who does financial planning for high net worth people. She says these people's savings rates have been through the roof. My guess is these people are throwing off the average.

ryandrake 3y ago
I mean, it makes sense. Unless you are living some extravagant lifestyle, beyond a certain point, income just gets hoarded straight into savings. If I made $1M a year, I wouldn't even be able to spend it if I wanted to. I couldn't think of anything to do with that money besides invest it somewhere or give it away. There are a lot of these doctors, lawyers, and corporate executives who make more money than they could possibly spend, so of course it all just gets slammed into savings.
- testval121 3y ago
  [dead]
sokoloff 3y ago
A lot of money can be/is spent on travel and vacations. For the last several years, the picture on that has changed significantly, for my own account meaning fewer international vacations, less domestic travel to see family, and a dramatic reduction in eating in restaurants (which is really expensive compared to cooking at home). I'm not high-net worth, but I suspect that a lot of the same vacation forces are at play in that community as well, particularly during the pandemic.

Clent 3y ago

Does that 8.3% include retirement savings to a 401k?