Americans were already struggling with their personal finances, and then COVID-19 hit.
According to the Pew Research Center, 44% think it will take 3 or more years to recoup their losses for those financially impacted by the pandemic. In comparison, 10% believe their personal finances will never recover.
There’s a good chance that you might be facing some difficult financial situations yourself. If not, you most likely know someone struggling to pay their bills, save money, or reach retirement. Whether you’re trying to improve your own financial situation or your loved one’s, we’ve compiled insightful personal finance facts from several sources like Forbes, USA Today, and Savology’s recent report, The State of Personal Finances.
Some Basics of Personal Finance Planning
Let’s start by reviewing some basics around personal finance planning, its benefits, and common practices.
1. Financial Planning Improves Outcomes
Financial planning exists to help people improve their personal finances. In fact, Savology found that households with financial plans are 2.5 times more likely to save enough for retirement compared to those without any plan in place.
2. Individuals with Financial Plans Feel Better
Having a financial plan makes individuals feel 83% better about their financial decisions and their overall financial situation after just one year.
3. Financial Planning Isn’t Common Practice for Americans
Research from Charles Schwab, among other sources, indicates that somewhere around 72% of households do not have a written financial plan.
4. American Millennials Lack the Financial Literacy Needed to Succeed
According to Nefe, an outstanding 76% of millennials lack even the most basic financial literacy to make informed decisions about their money.
5. Financial Advisors (and Coaches) Are Not Required to Complete Advanced Degrees
Unlike doctors and lawyers who are required to earn advanced degrees, among other rigorous requirements, financial advisors and coaches in the U.S. are not uniformly required to complete higher education coursework. Many financial professionals choose to earn one or more financial certifications to distinguish themselves.
How Much Are Americans Saving?
Americans are known as being some of the worst savers in the world. Let's a look at some stats that illustrate the savings rate in the United States.
6. The National Average Savings Rate Is 13.8%
Americans, on average, are savings 13.8% of their monthly income. However, while that may sound like a reasonable number, it doesn’t tell us how much they need to be saving to reach their financial goals and reach retirement.
7. The National Average Savings Rate Gap Is 9.1%
Regardless of the current savings rate, households are still falling short on saving enough to reach their goals. While most reports and findings publish this number, it actually isn't the most important one to pay attention to.
8. 34% of All Americans Have $0 in Savings
This finding published by CNBC is quite alarming. As we’ve seen in recent months, and for the better part of 2020, having no liquid savings can be extremely detrimental to your financial future and living conditions.
9. 66% of Millennials Have Zero Retirement Savings
A significant portion of Millennials continues to push back saving for retirement. While many think time is still on their side, many millennials turned 40 this past year.
10. Millennials that Are Saving Are Not Saving Nearly Enough
In fact, according to the National Institute on Retirement Security (NIRS), of the millennials that are actually saving money, 95% of them are saving less than the recommended amount.
What types of accounts do Americans have?
When it comes to various accounts, most Americans seem well poised with how they’re structuring their accounts. Here’s what we know, thanks to Savology’s recent The State of Personal Finances Report.
11. 81% of Households Have at Least One Type of Retirement Savings Account
When 2/3 of America's largest generation (Millenials) have no retirement savings, a high number like this is actually a pleasant surprise.
12. 93% of Households Have at Least One Checking account
While many Americans have a checking account, some people don't open one because they can't meet the banks' minimum balance requirements.
13. 81% of Households Have at Least One Savings Account
Considering that 1/3 of Americans have no savings, fewer people have a savings account than a checking account. Perhaps not a surprise, but Americans aged 65-74 have the most money in a savings account.
14. 26% of Households Have a Health Savings Account
Despite the ability to use an HSA account as a long-term vehicle for healthcare-related savings, most Americans are spending all of the money they are putting aside in these types of accounts for yearly healthcare expenses.
15. Only 2.5% of Households Are Utilizing 529 College Savings Accounts
Considering the number of adults with personal finance struggles, it's not a surprise that only a small number of Americans are saving for their kid's college in a 529 account.
Do Americans Have Any Emergency Fund?
If there’s anything the pandemic and recession has taught us, it’s that having an emergency fund isn’t a nice-to-have financial tool. It’s a must.
Emergency savings help us protect our lifestyles from unexpected expenses and financial emergencies, such as losing employment. Here’s what we know about emergency savings.
16. 65% of Households Have a Dedicated Emergency Fund (of any size)
Most American households have recognized the importance of having emergency savings to draw from when needed.
17. 69% of Households Have Less Than $1,000 in Emergency Savings
While it’s great to see that many households have what they call a dedicated emergency fund, according to the Associated Press, it isn’t enough as 69% of households have less than $1,000 in their emergency savings.
18. 14% of Households Have Wiped Their Emergency Savings During the Pandemic
According to CNBC, more than 14% of households have wiped their emergency savings because of financial emergencies due to the pandemic.
Debt & Liabilities
When done right, debt can be a useful financial tool to gain leverage, make smart financial moves, and build credit. However, the reality is that far too often, debt gets in the way of financial goals and becomes detrimental to retirement and other goals. Here’s what we know about debt and liabilities across the United States.
19. 100 Million Americans Have Outstanding Auto Loans
There are nearly 100 million Americans that collectively owe $1.3 trillion on existing automotive loans. When you consider the other types of loans and credit accounts that everyday consumers have access to, it starts to paint a clear picture of how severe the debt problem is.
20. 44.7 Million Americans Have Outstanding Student Debts
According to Forbes, nearly 45 million Americans are burdened with outstanding student debts.
21. The Average Amount of Current Total Student Debt is $50.4K per Household
The average household has more than $50,000 in current student loan debts, giving context to Millenials and other younger generations' low savings rate.
22. 43% of Student Borrowers Aren’t Making Their Payments
According to The Wall Street Journal, getting a post-secondary education leaves households in a very vulnerable situation where almost half of the households with active student debt cannot make their payments.
23. 38% of Households Have Revolving Credit Card Debt
According to USA Today, 38% of households have revolving credit debt that they are carrying monthly.
24. The Average Total Amount of Credit Card Balance Carried Monthly is $10.3K
The average amount of credit card balance that households carry monthly is around $10.3K, meaning that most are stuck paying large amounts of interest, interfering with other savings goals.
People don't necessarily see insurance as part of overall personal finance, but the lack of insurance coverage has potentially large financial consequences. Here’s what we know about insurance across the United States.
25. 63.3% of Households Do Not Have All of the Recommended Insurances
One of the many factors driving underinsurance is life insurance coverage. As many as 9 million people only have group life insurance with a coverage gap of $225,000.
26. 87.8% of Americans Have Some Form of Health Insurance
For those who don't have health insurance, the main reason is cost. Interestingly, women are more likely than men to lack health insurance.
27. 56.6% of Households Have Some Form of Life Insurance Coverage
Despite affordable options out there, many people think they can't afford life insurance coverage.
28. 64.7% of individuals with Dependents, Including a Spouse, Have Life Insurance
While more people with dependents have life insurance, it's only a small increase.
29. 59% of Individuals with Life Insurance Do Not Have Adequate Coverage
Alaska has the highest average life insurance gap at a $310,000 difference, and Louisana has the lowest gap, but it's still a difference of $118,000 in coverage.
30. 84% of Millennials Are Underinsured
Millennials are considered the most underinsured generation in America. Despite nearing middle age, planning is still a driving factor when many are saddled with student loan debt.
Estate planning is one of the most neglected areas of personal finance. While it's hard to think about death, having your affairs in order is a gift you give to your family. Here’s what we know about the state of estate planning across the United States.
31. 23% of Households Have at Least a Basic Will as Part of Their Estate Plan
While it's a good start, it's still alarming that only 4 out 10 older Americans have a will, advance healthcare directive, healthcare power of attorney, and financial power of attorney documents in place.
32. Only 2.4% of Households Have a Complete Estate Plan
Two-thirds of Americans are concerned about their families’ long-term financial well-being. While Americans know the value of having these plans in place, it isn't translating to finalizing estate plan documents.
33. Only 6% of Households with Dependents Have a Guardianship Nomination in Place
Considering that 71% of Americans say that having a well-established estate plan would help them feel like a good spouse or parent, many aren't completing the legal paperwork needed.
34. 56 % of Americans Die Without a Will in Place
When asked why people don't have a will, the most common answers are that they haven't gotten around to it, believe they don't have enough assets to be relevant, or it's too difficult to find a professional to create the necessary plans.
Retirement planning is often synonymous with financial planning. It’s typically the major area of a financial plan that most Americans focus on. The reality is that all of the other financial plan areas influence what our retirement often looks like. Here’s what retirement looks like across the United States.
35. The Average American Wants to Retire at 62
The average desired retirement age for Americans is 62, yet many have to spend many more years working to retire.
36. The Average Desired Retirement Income Replacement is 79.9%
Retirement income replacement is essentially the amount of income you’ll need in retirement to sustain a living as a percentage of your current income. An income replacement of 80% means that the average American wants to retire with about the same lifestyle as they currently have.
37. The Realistic Retirement Age for the Average American is 72.6
Based on current financial situations, the average realistic retirement age is 72.6, ten years later than the average desired retirement age of 62.
38. The Average American Could Retire at 65
If people made personal finance adjustments, the average realistic retirement age would be 64.7, which is only three years later than the desired retirement age of 62.
39. Only 28% of Households Are on Track
On average, only 28% of households are on track to reach their retirement goals. This means that most households will have to work long past the desired age they'd like to retire.
40. The Average Retirement Shortfall is 10.7 Years
The average number of retirement years that Americans will not have enough savings to cover their living costs. It's scary to think that it's a difference of time of a complete decade.
Personal Finance in the Workplace
Financial planning in the workplace is a big topic these days. As an employer, investing in your employees' financial wellness benefits is one perk to draw your business's best employees.
41. Financial Stress is Costing Employers $1,900 Annually, per Employee
On average, employers lose $1,900 per employee annually due to financial stress and total an estimated annual loss of $1 million for mid-sized employers and $19 million for large employers.
42. Financial Stress Has Increased 23% Since the Pandemic Began
It’s also important to note that the recent COVID-19 pandemic has had a serious impact on American’s financial stress levels. Surveys show that 62% of workers feel financially stressed, an increase of 23% since the pandemic began.
43. Access to Financial Wellness Benefits Improves Loyalty in the Workplace
Building loyalty in the workplace isn’t easy to achieve. It usually comes down to providing the right resources, tools, and benefits for employees. 59% of workers say that financial wellness benefits improve loyalty and the likelihood of recommending their employer.
44. 64% of Employees Regularly Think About Their Finances
In the past year, the COVID pandemic has challenged many American’s mental health while increasing their concern for their current financial situation. In fact, having financial difficulties is top of mind for 64% of individuals in America.
45. Financial Stress Increases Absenteeism
On average, financially stressed employees miss 3.5 more workdays each year than their colleagues who are comfortable with their financial well-being.
46. Financial Stress Impacts Work Productivity
In fact, 58% of employees experience financial stress that impacts their work. Meaning that employees who face financial stress are often less productive and struggle with focusing on their day-to-day work activities.
47. Employees Want Financial Wellness Benefits
90% of employees actually want some form of employer-provided financial wellness benefits from their employer. Ask your HR department what your current company offers.
48. Employees Are Struggling Financially
More than 50% of employees are living paycheck-to-paycheck. Financial wellness and planning can make a big impact to help individuals better prioritize their finances, improve their lives and their productivity on the job.
49. Employees Lack the Ability to Handle Unexpected Expenses
In fact, 63% of employees are unable to handle an unexpected expense of $500.
50. Financial Wellness Attracts Talent
In a study about financial wellness in the workplace, 75% of respondents admitted to being more likely to consider a job that offered free financial advice as part of a benefits package.