The State Of America s Household Finances - 2308 Words

The State of America’s Household Finances and How to Increase Savings Natalie A. Grime Central Michigan University Abstract This paper looks the current financial state a majority of American households face today. The research explains the most common reasons why American’s have such a difficult time spending and saving their earned money wisely. It seems more often than not, working Americans are heard of as living paycheck to paycheck and are not, in any way, financially prepared for an emergency, such as a sudden illness in the family or an unexpected household repair. This paper attempts to find the reasons Americans have poor spending and savings habits, and why there are very few who are debt-free, as well as steps to take†¦show more content†¦6). Interestingly enough, in a study by Pew Charitable Trusts (2015), 69 percent of Americans, when asked about nonmortgage debt, say although they prefer not to have debt, it is a necessity in their lives. Similarly, 68 percent of Americans said they would not have been able to make purchases or investments with just their income or savings alone yet loans and credit cards allowed them to do this (p. 8). Beyond â€Å"rainy day† savings, â€Å"†¦more than half of all American households lack sufficient retirement savings to maintain pre-retirement lifestyles, even if family members continue to work until age 65† ( Wuorio, 2015, para. 3). This paper examines where many American families are financially, why a majority of Americans struggle with saving money, and what changes should take place in order strengthen financial security and develop healthy spending habits. Household Savings Many financial advisors advise families, of any number, have three to six months of income in a savings account, in the unfortunate event unexpected expenses arise, such as job loss or a large home repair (Carrns, 2015). According to a 2015 report from the Pew Charitable Trusts, more than half of American households have less than one month of income in their savings, ready to be used in case of an emergency. Additionally, if the average middle income family were to tap into all available resources, including assets that can be expensive to tap