Give credit to the residents of Dubuque, Iowa. They saved their pennies last year, according to a recent study by MagnifyMoney.
Dubuque earned the highest Saving Score in MagnifyMoney’s Super Saving Metros report, which looks at the savings habits of residents living in the biggest metropolitan areas across the United States.
Relying on data from the IRS and U.S. Census Bureau, MagnifyMoney created a Saving Score for nearly 400 U.S. metropolitan areas. This score reveals:
- Which areas boasted the greatest percentage of adults who earned money from interest-bearing vehicles, such as savings accounts and certificates of deposit (CDs)
- How much interest on average these residents claimed on their 2017 tax returns
- What percent of their annual income came from interest
We’ve changed our study a bit this year. Instead of looking at cities with populations larger than 25,000, as we have in the past, this year we are looking at savings within entire metropolitan statistical areas. These areas often include several cities and provide a more accurate look at the savings habits of residents within a larger area.
One of our key findings? As a nation, the U.S. doesn’t have a lot of savers. Nationally, 28.3% of U.S. residents who filed income tax returns in 2017 earned interest income on their savings. This interest income averaged $554, equal to 0.76% of filers’ total income for the year.
Not all metro areas are created equal when it comes to savers, though. In Naples, Fla., for instance, filers reported an average of $3,224 of interest income on their taxes last year. But in Pittsfield, Mass., that average was a far lower $481.
There are also significant differences among metropolitan areas in how many residents earn enough interest from their savings to report to the IRS. Filers who earn more than $10 of interest on savings accounts, CDs, money market accounts, high-yield checking accounts or certain types of taxable bonds have to report their interest income. MagnifyMoney found that in Peoria, Ill., 48% of filers reported interest income on their returns. But in Los Angeles, just 30% did.
- Dubuque pulled down the top savings spot among the 381 U.S. metropolitan areas that MagnifyMoney studied. The city had the highest Saving Score, an impressive 97.8 out of a possible 100.
- Naples, which came in second with a Saving Score of 97, topped the country with the highest amount of average interest income per return, a strong $3,224. Naples also ranked first in highest percentage of interest income compared to total income. Filers here earned an average of 2.33% of their total annual incomes from interest on their savings.
- Peoria had the highest percentage of filers who earned at least some interest income. About half of the federal tax returns filed here last year had some amount of interest income.
- Iowa might have been the thriftiest state in the country in 2017. Dubuque notched the highest Saving Score in this year’s study. But the cities of Cedar Falls and Cedar Rapids also earned high scores. This isn’t a one-time fluke either. MagnifyMoney found a similar trend when looking at the numbers from earlier tax years.
What does the Saving Score measure?
It can be challenging to determine how much the residents of a particular metropolitan area are saving. For our study, we crafted a Metro Saving Score that relies on data from the IRS and U.S. Census Bureau for 381 metropolitan areas across the country.
We looked at three key factors to calculate our score:
- The percentage of all tax returns that declared interest income
- The percentage of residents’ total annual income that came from interest earned from savings
- The average interest income recorded on tax returns in a metropolitan area
50 cities with the top Saving Scores
Dubuque led our list of the metro areas with the biggest savers, earning a healthy Saving Score of 97.8. But what’s so special about Dubuque?
The area isn’t especially rich: The U.S. Census Bureau reported that the median household income stood at $56,154 in 2016 in Dubuque County and $48,021 in the city of Dubuque itself. That’s below the median annual household income of the U.S. as a whole, which was $57,617 in 2016. The Census Bureau also said 16.8% of the city’s residents lived in poverty, while 29.7% of residents have earned a bachelor’s degree or higher.
Regardless of the relatively modest incomes here, 44% of tax filers in the Dubuque metro area claimed interest income on their returns. This interest income averaged $781 per return, which accounted for an average of 1.24% of these residents’ annual income.
So why the high savings rate? Maybe it’s the low unemployment rate. The Bureau of Labor Statistics said the unemployment rate in Dubuque was a low 2.2% as of August 2018. It’s easier to save when you’re employed. Also, it’s not that expensive to live in Dubuque. The Census Bureau said the median costs for owners with a mortgage is $1,102 a month, while the median cost for renters is $728 a month.
Things are a bit different in Naples, where the Census Bureau said the annual median income was $84,830 in 2016. It’s important to note that median income isn’t the same as average income. The median is the dollar amount that half of all residents in an area earn less than each year and half earn more. In Naples, half of all households reported an annual income of less than $84,830, while half reported an annual income higher than that.
What is clear, though, is that the residents of this Florida city have more money to save, which might be why Naples ranked second with a Saving Score of 97. Here, 36% of income tax returns included interest income. The interest income per return in Naples was high, too, leading our survey with a hefty $3,224.
In Fairfield County, Conn., which came in third with a Saving Score of 96.3, 36% of tax returns recorded interest income. The interest claimed here was sizable, too, with an average of $2,434 claimed per return. Again, the residents here have more money to save, with the Census Bureau reporting a median household income of $86,670 in 2016.
Santa Barbara, Calif., and Boston rounded out the top five metro areas on our list. Santa Barbara earned a Saving Score of 95.7, with 36% of tax returns here claiming interest income. This income accounted for 1.18% of annual income earned by residents here. The interest income per return in Santa Barbara was a healthy $1,074.
And in Boston, with its Saving Score of 94.2, 37% of returns claimed interest income, with an average per return of $920.
10 cities with the most savers
Dubuque again represented itself well on our list of metropolitan areas with the most savers. But it didn’t top it. The No. 1 spot went to another Midwestern city, Peoria, where 48% of tax returns listed some form of interest income.
What makes Peoria residents such good savers? It’s hard to say. The income here isn’t sky-high, with the Census Bureau stating that the median household income stood at $46,547 in 2016. At the same time, though, it’s not expensive to live in Peoria, freeing up residents to save. The Census Bureau said it cost $1,200 a month for owners with a mortgage, while the median value of a home was $127,200. Those who rented didn’t pay too much, either, with the Census Bureau reporting a median gross rent of $746 a month.
Then there is Dubuque. Again, the income here wasn’t high, but housing isn’t overly expensive, perhaps making it easier for residents to save. The Census Bureau reported that owners with a mortgage paid a median value of $1,102 a month, while those who rented paid a median of $728 a month. Maybe that’s why Dubuque tied for second with 44% of returns claiming interest income.
Dubuque tied for this spot with Ithaca, N.Y., where the same percentage — 44% — of returns claimed interest income. It’s not easy determining how Ithaca residents were able to save so much. The Census Bureau reported that the median annual household income here was just $30,291 in 2016, while 44.8% of the people lived in poverty. At the same time, the median value of owner-occupied homes stood at a fairly high $219,100. This makes Ithaca’s high savings rate a bit of a mystery.
Appleton, Wis., is easier to explain. This area ranked fourth on our list with 42% of returns claiming interest income in 2017. This isn’t surprising: The Census Bureau said the median household income here was $53,878 in 2016, while the median value of owner-occupied homes was a fairly low $137,800. Perhaps residents spent less on housing costs and were able to save more.
Iowa City, Iowa, finished fifth on our list, tied with Appleton with 42% of returns claiming interest income. That percentage was a popular one, with Rochester, N.Y., and yet another Iowa city — Cedar Falls — tying with Appleton and Iowa City.
10 cities that earned the most interest income
Here is a not-so-shocking fact: People who make more money tend to save more of it. That’s proven by our list of metro areas in which taxpayers claimed the most interest on their returns.
Look at Naples. Those living here earned a lot of interest income in 2017. According to our research, the average return filed here in 2017 listed a whopping $3,224 in interest income. That easily topped our list. The reason is fairly obvious: A lot of wealthy people live here.
The city is a costly one, with the Census Bureau showing that the median home value is $770,000, while it costs owners with a mortgage a median $2,987 a month. With those barriers to entry, it’s not surprising that the median household income was $84,830 in 2016. When you earn more, it’s easier to save more — a lesson made clear in Naples.
Fairfield County was second on this list, with the average tax return listing interest income of $2,434 in 2017. Again, this is another high-income area, with the Census Bureau reporting that the median household income was $86,670 in 2016.
Next on our list is Vero Beach, Fla., where the average interest income reported on tax returns stood at a healthy $1,839. This city is a bit more puzzling: The Census Bureau showed that the median household income was a modest $38,405 in 2016. And it’s not particularly cheap to live here, with the Census Bureau stating the median costs for owners with mortgages as $1,654, while monthly rent stands at a median of $829.
Coming in fourth on our list is another Florida tourist metro, Fort Myers, where the average interest income per return was $1,195. This is an interesting place: In the city of Fort Myers, with a population of almost 80,000, the median household income is $38,971. But if you focus on the smaller area of Fort Myers Beach, where the population is just more than 7,000, the median household income is $59,416.
The New York City metro area claimed the fifth spot on this list, with an average interest income of $1,146 reported per return. With a population of more than 8.6 million, New York City itself sees a wide range of yearly incomes. The median household income is $55,191, but plenty of households saw a far higher income than that. This helps explain the Big Apple’s high spot on this list.
10 cities with the lowest Saving Scores
While there are plenty of metro areas where people are saving, there are others that have earned low Saving Scores from our research. In most of these areas, the median household income is low. In others, unemployment is high.
This isn’t surprising: It’s a challenge to save when you don’t make enough and you’re struggling to find a job.
The first metro area on our list of areas with the lowest Saving Scores — Hinesville, Ga. — earned a Saving Score of just 0.5, with 15% of income tax returns filed in 2017 claiming interest income. The average filer here claimed just $80 worth of interest on their returns.
The median household income stood at $42,949 in 2016, according to the Census Bureau. That is below the median household income for the U.S., which the Census Bureau said was $57,617 in 2016.
El Centro, Calif., ranks high on this list, too, coming in second. Unemployment is a problem here, with the Federal Reserve Bank showing the rate at a high 17.2% in El Centro as of August 2018.
Third on our list was Fayetteville, N.C., earning a Saving Score of 1.8. Only 18% of tax returns here claimed interest income in 2017, with the average return listing just $149 in interest income. The median household income was $43,882 in 2016, while 18.4% of the population lived in poverty. The Census Bureau also reported that 14.2% of the people younger than 65 do not have health insurance, a factor that could account for the low savings rate here.
Pine Bluff, Ark., scored a low 3.0 Saving Score with 19% of income tax returns claiming interest income. Pine Bluff’s population is declining, falling to 42,984 in 2017, a drop from 49,083 in 2010 — a dip of 12.4%. At the same time, the median household income was just $30,942 in 2016, while 32.5% of residents lived in poverty.
Rounding out the bottom five of savers was the metropolitan area of Florence, S.C., with a Savings Score of 3.7. Just 17% of returns here claimed interest income in 2017. The median household income here was not terrible, but at $44,989 is still below the median for the U.S.
How to save more money
Need to increase your savings rate? There’s no secret formula. Start with crafting a household budget. List the income that comes into your household each month and the money you spend during the same time. Include both fixed expenses such as your monthly rent, mortgage payment, auto payment or student loan payments while estimating those that vary each month, such as your utility bills, transportation costs and grocery bills. Make sure to also budget for discretionary expenses such as eating out and entertainment.
This budget will tell you how much you should have at the end of the month for savings. If you don’t have much, or if you are spending more than you are earning, you’ll need to cut back on whatever expenses you can. This might require slashing your spending at the supermarket or cutting back on restaurant meals.
Be sure to start an emergency fund, too. You use the dollars in this fund to pay for any unexpected expenses that pop up, such as a busted water heater or blown transmission on your car. If you have this fund built up, you won’t have to resort to paying for these emergencies with a credit card, something that will build up your debt and make it even more difficult to save.
It’s important to note, too, that it might be a bit easier now to earn interest on your savings. That’s because as the Federal Reserve raises its benchmark interest rate, banks and credit unions are starting to do the same, boosting the interest rates attached to their savings accounts and CDs. These rates might still be small, but they are set to improve, so now is a great time to begin saving those dollars.
To rank cities, MagnifyMoney created a Saving Score on a scale of 0 to 100 that included three equally weighted components:
- How broadly individuals in the metro saved (measured by the percentage of all tax returns that declared interest income, ranked by percentile).
- The metro’s dedication to saving regardless of their income (measured by the percentage of total income that came from interest, ranked by percentile).
- The absolute magnitude of savings in the metro (measured by the average interest income per tax return, ranked by percentile).
MagnifyMoney measured these factors using anonymized data from tax returns filed with the IRS from Jan. 1 to Dec. 31, 2017.
To be counted as a saving household, the taxpayer must declare interest income using Form 1099 on their 2016 tax returns. Filers who earned over $10 in interest on savings and investments, including a high-yield checking or savings account, a CD, a money market account or certain types of taxable bonds, should have received a copy of 1099-INT, which reflects interest income reported by financial institutions to the IRS.