Two new USFD Issue Briefs explore the issue of savings. Particularly, what our data show in terms of how families are building up savings for emergencies and how they differentiate short- versus long-term savings.
Everyone agrees that Americans don’t have enough emergency savings (or retirement savings for that matter). But the idea behind emergency savings, and the way savings are measured, hides what low- and moderate-American households need savings for, and how much they are really saving. Households are saving for near-term small “emergencies.” And those emergencies—months where income is well below normal, or expenses spike above normal—happen so often that it prevents households from building up larger amounts for larger emergencies.
Discussion about how and how much low- and moderate-income households save is hampered by the fact that key terms are fuzzy. How long does money have to be set aside before it is considered saving? Are savings account balances an accurate representation of savings behavior? For the households we studied, short-term savings dominates long-term savings. Many households seem to be setting aside substantial amounts of their income, but spending down these savings within the year. Short-term saving has not received adequate attention in programs and policies for lower-income households.
USFD’s methodology of regularly observing household finances over long periods of time allows researchers to identify common issues and challenges and highlight often-overlooked strategies of financial management. Each USFD Issue Brief below focuses on topics illuminated by detailed financial data as well as stories from household members, such as income volatility, financial planning and budgeting, credit challenges, and strategies to build and maintain savings.