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Americans Aren’t Saving, Little Splurges Add Up

This article was written by in Saving. 14 comments.

Here are some interesting survey results from the Pew Research Center.

  • 77% of Americans describe themselves as “always looking for more ways to save money,” while 18% don’t even try to save.
  • 63% believe they should save more, while 32% believe they are saving enough.

How about spending more than one can afford? Today, a government report showed a negative savings rate of 1.2%, worse than the previous rate of 1.0%, meaning on average Americans are spending $101.20 for every $100 of income. Here is what the Pew survey reported about spending.

More than one-in-three (36%) Americans say they often or sometimes spend more than they can afford. Among the groups most inclined to say this are lower-income adults, younger adults, blacks, people who carry credit card debt, and self-described savers.

Why is this trend getting worse? US News & World Report believes this is due to little splurges, based on the survey results.

Consumers have drastically expanded the list of things they deem to be necessities of life. For instance, 68% of adults now believe that a microwave oven is an absolute necessity, up from just 32% a decade ago. Fifty-nine percent say they absolutely must have an air conditioner in their cars, up from 41% who thought so in 1996. Roughly half of all respondents say that a home computer and a cell phone are needed to function in day-to-day life.

This might be a difficult question. What do you consider a necessity now than you may not have ten years ago?

Updated October 16, 2008 and originally published February 1, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 14 comments… read them below or add one }

avatar MoneyFwd

I think it’s funny that self-described savers have ended up in the “spend mor than you can afford” category.

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avatar Cujo

Many things almost make it, but one thing is absolutely a necessity since a decade ago: Broadband.

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avatar Daisy

I don’t know about anyone else, but so much of my work is done online, I couldn’t function very well without high-speed internet.

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avatar mapgirl

Broadband. My car. (Due to a job in the suburbs while 10 years ago I lived in the city and the car I used belonged to my roommates.) But I also make nearly triple what I made back then.

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avatar James

I don’t have air conditioning in my car. I’ve never purchased a microwave, but I have one. I’ve had a cell phone instead of a land line for about 18 months. I’ve had a computer since I was 5 years old (almost 23 now). My work requires the computer. I could get away with dialup instead of broadband, but I don’t wanna. I suppose I could just eat beans and rice, but I don’t wanna. I splurge for tasty food (that I prepare. I rarely eat out). :P
I bought a handgun this past summer. That’s about it.

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avatar moneysmartlife

Ditto on broadband. How else could we read all of the wonderful content on this site :)

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avatar klerg

A cell phone…

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avatar Marcus

The ones that come to mind are the ones I’ve gotten because I have kids:

a.cell phone, so I can be reached at all times
b. burglar alarm ($35/mo.) so that I know the family is safe when I travel
c. newer and safer car

I don’t *need* any of those things but would not want to do without them, either.

Curiously – I don’t include broadband as one of them. I get so much info. that I NEED from the Net that to NOT have it would cost me more in productivity than I spend for it.

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avatar Leo Babauta

Good post. The problems are credit card spending, a society geared towards overspending, and the lack of good financial habits.

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avatar Nagel

Americans have negative savings rate–I did not think you could get worse than 0.

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avatar Foobarista

One thing that has to be remembered is the “personal savings rate” does not include 401K or Traditional IRA contributions (Roth IRAs _do_ count since these contributions are done with after-tax income). The “personal savings rate” is calculated as the amount saved out of “disposable income”, which is computed using after-tax income. It also doesn’t count things like mortgage principal paydown, etc.

I agree that people don’t save enough, but one must be careful when interpreting statistics.

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avatar wormbuff

One more thing to remember is that the price-per-feature doesn’t stay constant, especially over 10 years. Anyone remember the premium for getting a computer with 512MB of RAM? Very specialized example here, but it’s part of the reason why “splurge features” are taken advantage of.

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avatar Luke Landes

Foobarista: considering millions of Americans do not have access to a 401k and don’t contribute to a traditional IRA, the fact that pre-tax savings mechanisms are not included in these particular statistics doesn’t much change the fact that savings are low. But you’re right in that in order to understand any study you have to be aware of all the nuances.

worm: the splurge features in technology very quickly become required… I remember when 512MB was a splurge… I remember when a hard disk drive was a splurge. Hell, I remember when a computer was a splurge. And many people older than I am can go farther with this memory experiment. :-)

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avatar Foobarista

But millions of Americans _do_ have access, and the amounts that can be set aside are far higher than they were even a few years ago. After all, you’ve got 401Ks, IRAs, flexible spending accounts, kid college accounts, etc; it’s quite easy for a couple to save tens of thousands of dollars in a year and still have a “negative personal savings rate”. Given that the personal savings rates have dropped at the same time that the maximums on 401Ks and IRAs have gone up, one wonders if there’s a correlation.

After seeing one of these articles in early 2006, I calculated our own personal savings rate for 2005; it was barely positive since we’d bought a car. But we saved $45K in various tax-sheltered savings vehicles that year.

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