The US personal finance industry is worth $3.4 trillion, and Americans are spending more on credit cards than ever before.
The state of personal finance is a term that refers to the state of an individual’s personal finances. There are many surprises when it comes to Americans’ personal finances, such as how much money they have in their bank account or who has the most debt.
Americans were already having financial difficulties when COVID-19 struck.
According to the Pew Research Center, 44 percent believe it will take three or more years for individuals financially affected by the epidemic to recover their losses. In contrast, 10% of people think their personal finances will never improve.
There’s a high possibility you’re dealing with some financial difficulties yourself. If you don’t, you probably know someone who is trying to pay their bills, save money, or retire.
We’ve collected informative personal finance statistics from various sources, including Forbes, USA Today, and Savology’s latest study, The State of Personal Finances, whether you’re attempting to better your own or a loved one’s financial position.
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Personal Finance Planning: The Fundamentals
Let’s start with some fundamentals about personal financial planning, its advantages, and typical methods.
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1. Financial Planning Helps You Achieve Better Results
Financial planning exists to assist individuals in bettering their own finances. In fact, Savology discovered that families with financial plans are 2.5 times more likely than those without a plan to save enough for retirement.
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2. People who have a financial plan are happier.
After only one year, having a financial plan helps people feel 83 percent better about their financial choices and overall financial position.
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3. Financial planning is not a common practice in the United States.
According to research from Charles Schwab and other sources, about 72 percent of families do not have a documented financial plan.
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4. Millennials in the United States lack the financial literacy required to succeed.
According to Nefe, a staggering 76 percent of millennials lack even the most basic financial literacy, making it difficult for them to make educated financial choices.
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5. Advanced degrees are not required of financial advisors (or coaches).
Unlike physicians and attorneys, who must obtain postgraduate degrees and meet other stringent criteria, financial advisers and coaches in the United States are not required to finish higher education courses consistently. To set themselves apart, many financial professionals opt to get one or more financial certificates.
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What is the average amount of money saved by Americans?
Americans have a reputation for being among the world’s worst savers. Let’s take a look at some statistics that show the savings rate in the US.
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6. The average savings rate in the United States is 13.8 percent.
On average, Americans save 13.8 percent of their monthly income. While it may seem like a fair figure, it doesn’t tell us how much people need to save in order to meet their financial objectives and retire.
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7. The Savings Rate Gap in the United States is 9.1%.
Regardless of the current savings rate, families are still not saving enough to meet their financial objectives. While this statistic appears in most studies and conclusions, it isn’t the most essential to pay attention to.
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8.34% of all Americans have no savings at all.
This result, as reported by CNBC, is extremely concerning. Having no liquid funds, as we’ve seen in recent months and for the greater part of 2020, may be very harmful to your financial future and living circumstances.
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9. 66% of Millennials have no savings for retirement.
A sizable percentage of the Millennial generation continues to put off investing for retirement. Many millennials reached 40 this year, despite the fact that many believe time is still on their side.
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10. Even those millennials who are saving aren’t saving nearly enough.
In fact, according to the National Institute on Retirement Security (NIRS), 95 percent of millennials who are saving money are doing it at a lower rate than is advised.
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What are the different kinds of accounts that Americans have?
When it comes to different accounts, the majority of Americans seem to be in control of how they structure their accounts. According to Savology’s latest The State of Personal Finances Report, here’s what we know.
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At least one kind of retirement savings account is held by 11.81 percent of households.
A high figure like this is really a welcome surprise since 2/3 of America’s biggest generation (Millennials) has no retirement savings.
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At least one checking account is held by 12.3% of households.
While many Americans have a checking account, others are unable to obtain one due to the institutions’ minimum balance restrictions.
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At least one savings account is held by 13.81 percent of households.
A savings account is held by fewer individuals than a checking account, despite the fact that one-third of Americans have no savings. Americans aged 65 to 74 had the most money in a savings account, which is somewhat unsurprising.
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A Health Savings Account is held by 14.26% of households.
Despite the fact that an HSA account may be used as a long-term vehicle for healthcare-related savings, most Americans utilize all of the money they put into these accounts for annual healthcare expenditures.
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15. 529 College Savings Accounts are used by just 2.5 percent of households.
Given the high number of people experiencing financial difficulties, it’s no wonder that just a tiny percentage of Americans are contributing to a 529 college savings plan for their children.
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Are there any emergency funds in the United States?
If the pandemic and the recession have taught us anything, it’s that an emergency fund isn’t a nice-to-have financial tool. It’s a must.
We can safeguard our lifestyles by putting money aside for unforeseen expenditures and financial crises, such as losing our jobs. Here’s what we know about putting money aside for an emergency.
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16.65% of households have an emergency fund set up (of any size)
The majority of American families have realized the value of keeping emergency funds on hand.
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17. 69 percent of households have an emergency fund of less than $1,000.
While it’s encouraging to see that many families have a “designated emergency fund,” the Associated Press reports that it’s not enough, with 69 percent of households having less than $1,000 in emergency savings.
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During the pandemic, 18.14 percent of households had depleted their emergency savings.
According to CNBC, more than 14% of families have depleted their emergency reserves as a result of the pandemic’s financial consequences.
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Liabilities & Debt
Debt may be a helpful financial instrument for gaining leverage, making wise financial decisions, and building credit if used correctly. However, the truth is that debt often gets in the way of financial goals, jeopardizing retirement and other objectives.
The following is a summary of what we know about debt and obligations in the United States.
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19. There are 100 million outstanding auto loans in the United States.
Nearly 100 million people in the United States owe $1.3 trillion in outstanding car loans. When you examine the many kinds of loans and credit accounts that ordinary people have access to, it becomes apparent how serious the debt issue is.
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Student debt affects 20. 44.7 million people in the United States.
Nearly 45 million Americans, according to Forbes, have outstanding college debt.
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21. The average current total student debt per household is $50.4K.
The typical family now owes more than $50,000 in student loan debt, putting millenials’ and other younger generations’ low savings rate in perspective.
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22.43 percent of student borrowers default on their loans.
According to The Wall Street Journal, obtaining a post-secondary degree puts families in a precarious position, with almost half of those with current student debt unable to make payments.
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Revolving credit card debt affects 23.38 percent of households.
According to USA Today, 38% of families have revolving credit debt that they are responsible for on a monthly basis.
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24. The monthly average total credit card balance carried is $10.3K.
The average credit card debt carried by families each month is approximately $10.3K, which means that most are stuck paying high interest rates, which interferes with other savings objectives.
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Insurance
People don’t often consider insurance to be a component of their overall financial planning, yet not having insurance may have serious financial implications.
Here’s what we know about insurance in different parts of the country.
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25. 63.3 percent of households do not have all of the insurances that are recommended.
Life insurance coverage is one of the numerous variables that contribute to underinsurance. As many as 9 million individuals have just group life insurance with a $225,000 coverage gap.
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26.87.8% of Americans have health insurance of some kind.
The primary reason for individuals who do not have health insurance is the expense. Surprisingly, women are more likely than males to be uninsured.
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Some kind of life insurance is carried by 27. 56.6 percent of households.
Despite the fact that there are cheap alternatives available, many individuals believe they cannot afford life insurance.
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Life insurance is carried by 28.64.7 percent of people with dependents, including spouses.
While there is a little rise in the number of individuals with dependents who carry life insurance, it is still a modest increase.
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Only 29.59 percent of those with life insurance have enough coverage.
The largest average life insurance gap is in Alaska, with a $310,000 difference, while the smallest is in Louisiana, with a $118,000 difference in coverage.
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Millennials are underinsured in 30.84 percent of cases.
Millennials are the most uninsured generation in the United States. When many people are burdened with student loan debt, even as they approach middle life, planning is still a motivating force.
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Preparing a Will
One of the most overlooked aspects of personal finance is estate planning. While it’s difficult to consider death, getting your affairs in order is a gift you can offer to your loved ones.
Here’s what we know about the current status of estate planning in the US.
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As part of their estate plan, 31.23 percent of households have at least a basic will.
While this is a positive start, the fact that just 4 out of 10 seniors have a will, advance healthcare directive, healthcare power of attorney, and financial power of attorney papers in place is concerning.
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Only 2.4 percent of households have an estate plan in place.
Two-thirds of Americans are worried about their family’ financial security in the long run. While most Americans understand the need of having these plans in place, many aren’t following through on completing estate planning papers.
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33. Only 6% of families with children have a guardianship nomination in place.
Given that 71% of Americans believe that having a well-established estate plan will make them feel more like a decent husband or parent, many aren’t completing the necessary legal papers.
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Unwilled Americans account for 34.56 percent of all deaths in the United States.
When individuals are asked why they don’t have a will, the most frequent responses are that they haven’t gotten around to it, that they don’t think they have enough assets to be important, or that finding a professional to make the required arrangements is too difficult.
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Retirement
Financial planning and retirement planning are often used interchangeably. Most Americans concentrate on it as the most important aspect of their financial strategy. The truth is that every other aspect of our financial strategy has an impact on how we spend our retirement.
Here’s how retirement looks in different parts of the country.
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35. The Average American Dreams of Retiring at the Age of 62
Although the average retirement age in the United States is 62, many people must work for many more years before they may retire.
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36. The average replacement rate for desired retirement income is 79.9%.
The amount of money you’ll need in retirement to maintain your standard of life as a proportion of your present income is known as retirement income replacement. With an income replacement rate of 80%, the typical American wishes to retire with a similar lifestyle to their present one.
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37. The average American’s realistic retirement age is 72.6 years.
The average practical retirement age, based on current financial circumstances, is 72.6, 10 years later than the average anticipated retirement age of 62.
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The Average American Could Retire at the Age of 65.
The average practical retirement age, if individuals made personal financial adjustments, would be 64.7, which is just three years later than the ideal retirement age of 62.
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Only 28% of households are on track, according to 39.
Only 28% of families are on pace to meet their retirement objectives on average. This implies that most families will have to work far beyond their anticipated retirement age.
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40. There is a 10.7-year retirement gap on average.
The average number of years in retirement that Americans would be unable to pay their living expenses due to a lack of savings. It’s frightening to consider that there’s a decade’s worth of time gap.
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In the Workplace, Personal Finance
Workplace financial planning is a hot subject these days. Investing in your workers’ financial wellness benefits as an employer is one incentive that will attract the best staff to your company.
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41. Financial Stress Costs Employers $1,900 Per Employee Per Year
Employers lose an average of $1,900 per employee per year owing to financial stress, resulting in an annual loss of $1 million for mid-sized businesses and $19 million for big businesses.
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42. Since the Pandemic began, financial stress has increased by 23%.
It’s also worth noting that the recent COVID-19 epidemic has had a significant effect on financial stress levels in the United States. According to surveys, 62 percent of employees are financially worried, up 23 percent since the epidemic started.
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Access to Financial Wellness Benefits Improves Workplace Loyalty 43.
It’s not simple to cultivate employee loyalty in the workplace. It generally boils down to providing workers with the appropriate resources, tools, and benefits. Financial wellness advantages, according to 59 percent of employees, increase loyalty and the probability of recommending their company.
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44.64 percent of employees think about their finances on a regular basis.
The COVID epidemic has tested many Americans’ mental health in the last year, while also raising their concerns about their present financial position. In fact, experiencing financial problems is on the minds of 64 percent of Americans.
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Financial stress increases absenteeism. 45.
Employees who are financially worried miss 3.5 more workdays each year on average than their counterparts who are financially secure.
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46. Work Productivity Is Affected by Financial Stress
In reality, 58 percent of workers are affected by financial stress at work. Employees who are under financial stress are typically less productive and have difficulty concentrating on their daily job tasks.
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Employees Want Financial Wellness Benefits 47. Employees Want Financial Wellness Benefits
90 percent of workers want their company to offer financial wellness benefits. Inquire with your HR department about the benefits that your present employer provides.
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Employees are having financial difficulties (number 48).
More over half of all workers are living paycheck to paycheck. Financial health and planning may help people better prioritize their money, enhance their lives, and increase their productivity at work.
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Employees Lack the Ability to Handle Unexpected Expenses 49. Employees Lack the Ability to Handle Unexpected Expenses
In fact, 63 percent of workers would be unable to cope with a $500 unexpected cost.
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50. Affordability Attracts Talent
In a survey on workplace financial health, 75% of respondents said they would be more inclined to choose a job that included free financial counseling as part of the benefits package.
This story was syndicated by MediaFeed.org and first published on YourMoneyGeek.com.
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