Top 5 Reasons Why Americans Struggle to Save Money

Joyce Pierce
February 20, 2024
Fact checked by
Sunny

KEY TAKEAWAYS
With inflation being on the rise and everything getting more expensive, it’s becoming harder to save any money.
You need to understand what inflation is and why so many people struggle with saving money.
You also learn about some of the most common reasons why many Americans struggle to even save a dollar each month.

With the high price of gas and the ever-more expensive trips to the grocery store, it’s becoming harder to even survive these days.

And you’re not alone in this.

All of us are feeling the effects of inflation too.

You know, according to a YouGov survey, more than 27% of Americans have less than $1000 in savings, while 12% have none at all.

With all this going on, it’s becoming harder and harder to even have any money saved up for our financial goals or any emergencies.

Without sufficient reserves, many Americans today can’t even think of leaving the workforce once they reach retirement age.

But, what specific reasons are preventing people from saving money and building financial security? Let’s examine this further.

DID YOU KNOW?
For many Americans, inflation remains the primary roadblock holding them back from saving more money.

Top Reasons Why Americans Struggle to Save Money

You know, having little to no money could put anyone in dire straits.

This is especially the case for individuals, families, and societies alike.

And there are just too many reasons to count, it can differ from person to person.

So, let’s take a look at some of the most common reasons why you’re not saving any money.

Excessive Debt

Did you know that the average consumer debt in the US has crossed $17 trillion in 2023.

Clearly, the classic American lifestyle can be blamed for this, it has pretty much created a society where everyone being in debt is a common thing.

Mortgages and HELOCs consume the largest part of individual debt.

Plus, aside from this, there are also many different types of debts too.

From student and auto loans to credit card debt, many people need to work for a lifetime to even be able to pay off a fraction of that amount.

Over-Consumption

Over-consumption is pretty much one of the main reasons why many of us fail to save even a single dollar each month.

The effects of rising inflation on the prices of the daily basics like food and rent, have pretty much taken a toll on disposable income.

But the needs of the average person have only grown much more.

The truth of the matter is that over the decades, Americans have become more materialistic.

And, the influence of social media and other digital mediums has only made them more insatiable and overly ambitious.

It is no longer rational thinking that is driving most purchasing decisions but rather the fear of losing out (FOMO) and the desire to keep up with the Joneses.

As a result, many people are over-consuming beyond their means.

Ready access to borrowed money through credit cards and loans is fueling this trend more.

Insufficient Income

Our salaries can barely keep pace with our expenses and by some miracle, it does catch up.

The increase in prices can put you back where you began.

And when you couple this with excessive spending habits and sizable debt obligations, saving money for future needs could naturally take a back seat.

Financial Scams

You know, in 2022 alone, Americans lost $8.8 billion to scams.

This is a pretty huge amount of money when you think about it.

If you had gotten even a fraction of it, you could easily pay off all that student debt in one go.

Lack of Financial Literacy

Well, the average American has very little knowledge about their finances, let alone planning.

When they don’t understand the importance of saving, minimizing debt, and managing expenses, they could make disastrous financial decisions that could put not only themselves but their families at risk too.

How Can You Start Saving?

If you have a ton of debt that even your monthly income cannot cover, saving money is a pretty far-fetched idea for you.

But it should not be so. With proper planning and a positive approach, you can start making more prudent financial choices today.

Here’s what we suggest you do.

Prepare a Budget

You can start by simply keeping track of your monthly expenses to identify the biggest cost base.

Then, remove the unnecessary ones and check how you can reduce the rest.

For example, you might need to let go of excessive restaurant dining and prepare your lunches and dinners.

Remember, each dollar you save makes a difference and can go into a savings account.

Once you prepare a monthly budget, keep monitoring your expenses to ensure you stick to it.

Set Saving Goals

When you have specific goals and ambitions, saving becomes more meaningful.

Your goals can involve purchasing a home or setting aside a certain amount of money for a nest egg.

Whatever you decide, ensure they are specific, measurable, realistic, and time-bound.

Then, create a vision board to help you imagine them.

Start Small and Automate

You know, many financial experts often boast about all the benefits of saving early.

So, the sooner you begin putting away money in an interest-yielding product, the more wealth you can accumulate by the time you retire.

You can even start saving today, even with a few dollars.

Each day you delay this, it becomes a missed opportunity you can’t reverse.

If you want to curb impulsive spending habits, automating the saving process is an excellent solution.

You can also tell your bank to transfer any of the remaining balance of your checking to your savings each week or month.

This will make saving money a pretty effortless endeavor for you.

Pay Off the Costly Debt First

High-interest debt instruments, including credit cards, can significantly erode your ability to save.

The more you delay paying off such debt, the more interest they will amass.

So, focus on settling the expensive debt as soon as possible.

Delay Big-Ticket Items

Overseas vacations and other expensive items on your bucket list will have to wait when you are taking the initial few steps toward financial freedom.

Keep in mind that your focus should be on building wealth, not depleting it.

Make Use of High-Yield Products

High-interest savings accounts are just one option for generating a substantial return on the money you save.

From individual retirement accounts (IRAs) with tax incentives to bonds, Treasury bills, shares, and index funds, you can use various products to create higher returns depending on your risk appetite.

Create an Emergency Fund

While you save money for your long-term pursuits, reserving funds for emergencies is also important.

Set aside money for unexpected crises in a separate savings product that allows you to withdraw quickly without impacting the rest of your investments.

Protect Your Savings From Fraudsters

Scammers could devise various schemes, from malware and phishing to deceptive marketing campaigns, to target you for financial fraud.

To avoid them, keep your data secure and stay clear of overly lucrative deals, including product promotions and investment opportunities.

You also need to adopt necessary verification practices to detect and evade fraudulent advances.

For example, use Nuwber to reverse search unknown callers and research organizations online to learn more about them.

Create Extra Income Streams

Consider how you could generate additional income that could help increase your monthly savings.

For example, teach a skill you are good at, rent a spare room in your house, or develop digital products to create a passive stream of money.

Acquire Financial Knowledge

Financial literacy is critical for building wealth. Of course, this doesn’t mean you need to get a college degree in finance.

Blogs, YouTube channels, and other online resources could help you gain deeper insights into essential practices and approaches for building financial security.

For example, learn about the different saving instruments available to you, how you can invest in the stock market, and what options you can effectively use to benefit from tax incentives.

All these will allow you to enhance your knowledge and make prudent saving decisions.