Families around the world are having trouble freeing up enough money to pay down debt and boost their savings accounts, according to a recent ING international survey.
The survey polled 18,000 people in 19 countries — and it shows how Americans compare with residents of other countries when it comes to debt and savings. We’re unhappy with how much we’re saving. We’re worried about not having enough for bills and emergencies. But we’re not alone in our money woes.
Dissatisfied with savings
The survey, released by ING in March 2012, shows that many Americans aren’t where they hoped to be financially by now. Americans are second only to Spaniards in unhappiness with accumulated savings. More than a third of us (36 percent) are unhappy with the amount we’ve saved. Compare that with just 9 percent of people in Luxembourg and Poland. And, while 20 percent of Americans say they have enough money left over after bills “to save and have some fun with,” even more are just breaking even or coming up short.
Americans do rank near the top when it comes to ability to access savings to pay down debt in the next year — but only 29 percent said they planned to do so. We’re still ahead of those in Western Europe; just 18 percent said they planned on using savings to pay down debt. Canada, however, has us beat, with 33 percent saying they planned to pay down debt with savings.
Americans also fare comparatively well when it comes to how much money we could get our hands on within a week to pay for an emergency expense. Nearly 40 percent of Americans said they would be able to get at least $2,600. Asians and Eastern Europeans are far less lucky.
One issue united all the countries in the survey: how much people are saving — or, rather, how much they’re not saving. In every country surveyed, the respondents who said they are saving less in a tough economy outnumbered those who said they are saving more. The U.S. fell in the middle of the pack, with roughly half of respondents saying they are setting less money aside than previously.
The sources of our savings struggles
So where is the money going, if not into savings? In all countries, the primary answer was housing and food. A majority of Dutch citizens (65 percent) said their biggest expense was housing compared to 54 percent of Americans. Food and utilities make up Americans’ other biggest expenditures.
With incomes stagnant and costs eating up more of the family income, it’s no wonder people feel there’s no money left to pay down debt and bulk up savings, says Courtney Cordero, director of education for American Debt Counseling in south Florida. The housing crisis has left people, particularly in her state, with few choices.
“Those who have kept their homes and have continued to pay are often house-poor,” she says. “They can’t afford the loans they were given and they have two options — either walk away and do a foreclosure or a short sale, or live paycheck to paycheck after paying housing expenses.”
Ideally, at least 10 percent of a paycheck should go into savings, Cordero notes. But according to the latest figures from the U.S. Department of Commerce, our personal savings rate, which is the percentage of disposable income that goes to savings, was 4.6 percent.
How can we change our saving attitudes?
Susan Bross, a financial counselor near San Francisco, says that behind Americans’ reluctance to save is a skewed sense of what we think saving is.
Rather than factoring into monthly budgets things that come up every year, such as car repairs, baby-sitting, birthdays and home improvements, consumers treat these costs as emergency expenses. If we factored them into the budget, we’d have a truer sense of what’s available to put into savings, she says.
“With my clients, their perception is, ‘If I put money aside, I’m just going to have to get it out anyway,’” Bross says. “I’m saying, set up your [budget] so that these things are already accounted for, and then, when you’re putting money away, you’re actually saving money.”
Sometimes it’s also hard to envision what you’re saving for, Bross says. Americans’ saving rates were high during World War II, when the concept of saving was more tangible.
“People could see what [their money] was actually going to be used for,” Bross says. “They knew they were buying bonds so more planes could be built, or they knew they were keeping Johnny in uniform by saving money. There was more direct cause-and-effect.”
Today, Americans’ attitudes toward finances are more pessimistic. According to the ING survey, the U.S. has a remarkably low level of trust in banks and other financial institutions. Only 17 percent of Americans said they trust banks to help them make financial decisions. Compare that with Canada, Australia and France, where roughly a third of respondents said they trusted banks to help them.
Beefing up savings will take more than just a brighter outlook, experts say. Relying too much on credit and underestimating how much it takes to fund a comfortable retirement are habits not easily broken — and that holds true for households around the world.
“Regardless of where you live, the sustained low interest rate environment has impacted the return on savings considerably,” said Ian Bright, senior economist for ING, in a statement. “We’re living in a new reality, where people need to shift their behaviors and attitudes towards better management of debt and long-term savings.”