Inflation has forced Americans to dip a little into their savings, with the personal savings rate slipping to 5.1% in June from 5.5% in May, according to the government.
The unofficial news isn’t too good for July either. To be sure, LendingTree The MagnifyMoney Savings Index showed that 42% of consumers saved money in July, compared to 35% this year in June.
People wanted to put money aside before a possible recession. But it is still the second lowest percentage of the year. And 17% of consumers said they withdrew funds from their savings in July, the highest rate since December 2021.
On the bright side, the saving figures of 42% and withdrawal figures of 17% are better than those of the last two years. In July 2021, only 37% saved money while 19% dipped into their savings. In July 2020, 40% saved and 21% withdrew.
Consumers are able to save money now, but things could get worse, thanks to inflation, says Ken Tumin, editor of Lending Tree’s DepositAccounts blog.
“Many consumers have been able to accumulate savings, and now they are focused on spending rather than increasing,” he said in a statement.
“If we don’t see inflation recede soon, many consumers may feel compelled to withdraw all or most of their money from their savings to pay for more expensive goods and services.”
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A total of 31% of consumers say they are saving for an emergency, up from 25% in July 2021. This likely stems from recession fears, according to MagnifyMoney. A recent poll he conducted showed that 70% of Americans believe a recession is coming.
“Job loss becomes more likely during a recession, and an emergency fund is especially important when you lose your job,” Tumin said.
“A consumer’s emergency fund should cover a few months of expenses. With high inflation increasing spending, consumers need to add more cash to ensure their emergency savings are properly funded.
Vacations, Retirement, Cars
After general savings and emergencies, the first destinations for consumer savings are holidays (24% of consumers), retirement (21%), new cars (17%) and holidays (14%).
Looking at the age distribution, a higher proportion of Gen Z (18-25) consumers added to savings in July than other generations: 61%.
This compares to 45% for Millennials (26-41), 35% for Baby Boomers (57-76), and 32% for Gen X (42-56).
Gen X tops the list of consumers who don’t have savings – 24%. Gen X has the highest score there – 13%
Men fare better than women, perhaps because women are often underpaid and have more financial responsibilities than men. In total, 49% of men saved money in July, compared to 35% of women.