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72% of Consumers Don’t Always Factor Savings Into Their Budget

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Spending money is easy and saving money is hard. We get it. That being said, there are concerning savings habits that more than 7 in 10 consumers share.

A MagnifyMoney survey of more than 1,000 Americans looked at how consumers prefer to save money, finding that 72% don’t have a preset monthly savings amount in their budget. Only 28% of consumers said their favorite savings strategy is setting automatic monthly transfers to their savings account each month.

We asked two of our experts — DepositAccounts founder Ken Tumin and MagnifyMoney millennial finance columnist Sarah Berger — to weigh in on these discoveries and how consumers can make better savings choices.

Key findings

  • 72% of consumers don’t factor a set savings target into their monthly budget, including 84% of Generation Zers. About 40% of respondents put whatever they can afford into savings, which varies.
  • Consumers’ favorite savings strategy is setting automatic monthly transfers to their savings account every month (28%), followed by keeping separate accounts for funds (20%), such as education or vacation.
  • A quarter of consumers prioritize discretionary spending before putting money into savings accounts, though experts generally recommend saving first and then spending what’s left over.
  • 60% of consumers save less than $500 a month, not including retirement savings. And, according to our latest monthly savings index, 21% of Americans don’t save any money at all.

Men more likely to have set savings targets than women

Only 28% of consumers set savings targets in their budget, with men doing so more often than women.

By gender, 35% of men have a preset amount they budget for, versus 21% of women.

“Time after time, we have found that the effects of the gender wage gap are very real — and they often put women at a financial disadvantage,” Berger said. “In many cases, you can only afford to save money if you are able to pay all of your bills and meet your basic living needs.”

If men are earning more money, Berger said, they’re less likely to be living paycheck to paycheck and therefore are more likely to save. Berger commented that eliminating the gender wage gap is a crucial step in putting women on an even playing field when it comes to setting — and reaching — savings targets.

As expected, income affects whether consumers set savings targets. In fact, 46% of those who make more than $100,000 a year have a preset savings amount they budget for each month, compared with just 16% of those who make less than $25,000.

Nearly 3 in 10 cite automatic transfers as favorite saving strategy

Consumers have their preferences when it comes to how they like to save money, with the most favored method being setting up automatic transfers each month (28%).

Consumers with higher incomes are more likely than those who earn less to prefer automatic monthly transfers to their savings account, possibly because lower earners may be at risk of overdrafting their account. This may explain why men (31%) enact this method more than women (26%), if you consider the gender wage gap.

Berger said she’s a fan of the automatic transfer method. “Personally, I like having 20% of my paycheck — after retirement contributions are taken out — automatically rerouted to a separate savings account on payday,” she said. “It makes me feel accomplished and like I am paying myself first, as opposed to just saving whatever is left over from my monthly budget.”

That being said, she doesn’t believe the method of saving is as important as the act of saving itself. “As long as you are saving, that’s what counts,” Berger said. “So, you should feel confident in taking whichever approach is best for you.”

Tumin sided with the 28% of consumers who said automatic transfers are their favorite way to save. “Everyone is busy, and if you have to manually add to your savings, the odds are high that you’ll put it off,” Tumin said. “When the transfers are scheduled to take place automatically on a regular basis, the savings will build even when you’re busy.”

Another popular savings method that respondents mentioned was the envelope method. Just about 1 in 7 Americans rely most on this method to save money, which involves setting aside cash in envelopes marked for different categories. This means people aren’t earning any interest on their savings, but the tangible experience can help some feel less tempted to spend.

Having a savings strategy in place isn’t a guarantee, though, as 22% of consumers reported not having a favorite approach. Again, there’s a noticeable gap between the savings habits of men and women. Nearly twice as many women (28%) said they don’t have a go-to savings strategy, compared with 16% of men.

36% start saving after paying for living expenses

There are various savings methods for consumers, and how they get there can vary greatly.

The most respondents (36%) save the amount of money left over after paying for living expenses. Those who earn less are more likely to save what’s left after discretionary spending than those who make more.

One smart path toward savings that only 16% chose was to create a monthly budget to understand how much they can afford to save each month. This is a great step to take before setting monthly savings goals or setting up an automatic transfer to a savings account.

Deciding to save based on what’s left over suggests that there is little planning and budgeting involved, Tumin said. Creating a monthly budget that includes savings is the best approach to take if you want to prioritize saving, he said.

48% of Gen Xers are saving for something specific

The majority of savers are doing so without any specific goals in mind. Other than saving for retirement or emergencies, only 40% of consumers are saving for something specific.

While baby boomers are the least likely to be saving for something specific (27%), Generation Xers are most likely to have a specific saving goal in mind.

Almost half of Gen Xers (48%) are saving for something specific. Gen Xers are still pre-retirement age and likely have more income coming in and expenses coming up (think college and weddings for children) than baby boomers.

According to the latest edition of MagnifyMoney’s monthly savings index, 21% of Americans don’t save any money at all. Other than general savings, emergencies or retirement, the highest percentage of consumers in December were saving up for vacation or a new car.

60% of Americans save less than $500 a month

When it comes to how much is put in savings, 6 in 10 Americans save less than $500 a month.

Breaking it down by education, 13% of those with a bachelor’s degree or higher put $2,000 toward non-retirement savings each month, compared with 5% of those with some college and 1% with only a high school education.

Once again, men come ahead in how much they save compared to women. While 71% of women save less than $500 a month outside of retirement contributions, only 49% of men reported doing the same.

Understandably, household income also plays a role. The group most likely to save less than $500 a month earns less than $25,000 a year. On the flip side, the group most likely to save $2,000 or more each month earns $100,000 or more annually.

“Most Americans aren’t saving enough,” Tumin said. “Generally, it should be more than $500 a month.”

He explained that the amount Americans should save depends on their emergency and “sinking” funds. The latter is a small amount of money set aside every month. Having a well-funded emergency fund will help if you lose your job or face unexpected expenses, while having a well-funded sinking fund will help you afford planned expenses such as car maintenance or vacation.

Understandably, the COVID-19 pandemic is likely hindering savings efforts. “Those who have lost jobs during the pandemic will likely have to draw on their savings rather than add to their savings until they’re able to find a new job,” Tumin said.

He believes that in times of uncertainty — like during a pandemic — it’s especially important to have a well-funded emergency savings fund.

“Any additional savings, such as from the government economic impact payments, should be used to build up your emergency fund,” Tumin said.

Methodology

MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,038 Americans, with the sample base proportioned to represent the overall population. We defined generations as the following ages in 2020:

  • Generation Z: 18 to 23
  • Millennial: 24 to 39
  • Generation X: 40 to 54
  • Baby boomer: 55 to 74

The survey also included responses from the silent generation (ages 75 and older). However, their responses weren’t included in the generational breakdowns due to low sample size among that age group.

The survey was fielded Oct. 19 to 21, 2020.

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Men Have Nearly $1,200 More in Their Checking Accounts Than Their Wives, Live-In Girlfriends

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Some couples love a night out on the town, while others prefer takeout and a TV remote. And these differences can apply to finances, too, as couples decide whether to keep their money separate or open a joint account.

MagnifyMoney analyzed the most recent Federal Reserve Survey of Consumer Finances to see how couples — married and cohabitating, straight and gay — handle their checking accounts. One discovery was that men have $1,191 more in their checking accounts than their wives and live-in girlfriends. Here’s what else we learned.

Key findings

  • In straight couples, men have — on average — $1,191 more tucked away than women when both partners hold their own checking accounts.
  • Only 39.9% of straight women, whether married or cohabitating, have more money in their individual accounts, compared with 51.2% of straight men.
  • Straight married couples keep an average of $18,334 in their joint checking accounts, compared with just $2,298 for straight couples who live together.
  • 72.3% of straight couples have joint checking accounts, while 48.5% of same-sex couples have joint checking accounts.

Among straight couples, men have 15.1% more in individual checking accounts than women

In straight relationships where both partners have their own checking accounts, men had an average balance of $7,872, while women had an average balance of $6,681 — a 15.1% difference.

To be considered a partner when not married, the couple — per the Survey of Consumer Finances — needed to be in the same “economic unit,” and neither party could be considered economically independent.

The difference in the amount of money that married men and women have in their individual checking accounts shrinks to just $85, or a 1.6% difference between the two spouses.

That contrast spikes to $2,927 for couples who live together ($6,613 for men, versus $3,686 for women) — a difference of 44.3%. This insight shows that married couples tend to be pretty equitable, while men who live with their girlfriends have nearly two-thirds of the funds if the couple’s individual accounts were combined.

Men, women rarely have equal amounts in individual checking accounts

Nearly 4 in 10 straight women — whether married or living with their partner — have more money in their individual accounts than their male partner does. That means that women and men only have an equal amount of funds in their checking accounts 9% of the time.

Gender wage gap plays likely role in disparities, our expert says

DepositAccounts founder Ken Tumin believes the gender wage gap may be causing the large differences between unmarried couples who are living together.

Since women — on average — earn less than men, Tumin said, one of the consequences is likely to be that women have smaller individual checking account balances than men.

“Married couples may do more sharing of income and expenses,” Tumin said. But “unmarried couples may have less trust and do less sharing,” he added, which could result in more use of individual checking accounts than joint checking accounts.

If each partner continues to use direct deposit with their individual checking accounts, the gender wage gap, per Tumin, would generally allow for men to have larger checking balances.

Straight couples have an average of $18,334 in joint accounts

Married straight couples with joint checking accounts have an average balance of $18,334 in those accounts, while cohabitating couples with these accounts have an average balance of just $2,298. This is likely because even if unmarried couples have a joint account that helps them manage shared household expenses, they may not have combined all their finances into one account.

72.3% of straight couples have joint checking accounts

Nearly three-fourths of straight couples (72.3%) have joint checking accounts. Out of all straight couples (whether married or not), just more than 1 in 3 men and women have their own checking accounts.

Only 10.7% of couples only have accounts in one person’s name, which is split pretty evenly across both genders.

While the majority of married couples (81.9%) have joint accounts, there is still a solid amount of husbands and wives who each have independent accounts (more than 28% each). Many people assume once you get married that you have to combine your finances, but that isn’t a hard-and-fast rule. Some couples may find they prefer to continue managing their finances separately even after they tie the knot.

Even though 21.9% of cohabiting couples have joint checking accounts, men (72%) are slightly more likely than women (70.3%) to have an independent checking account. Cohabitating couples have an almost identical percentage of individual accounts in both the man’s and woman’s name.

Overall, women and men tend to keep their own accounts at about the same rates. Men aren’t more likely to have their own checking account than women, but they are more likely to have a higher balance in their account.

48.5% of same-sex couples have joint checking accounts

There is a pretty even split among same-sex couples who do and don’t have joint checking accounts. In fact, 51.6% of lesbian couples have joint accounts, while 45.8% of gay couples do. Overall, 48.5% of same-sex couples have joint checking accounts.

Both partners have individual accounts 41.6% of the time, while 29.7% of lesbian and gay couples only have accounts in one partner’s name. When it comes to having an individual account for only one partner and no joint account, 37.2% of lesbian couples and 23.2% of gay couples fall into that category.

Is a joint checking account right for you?

Honestly, it depends. If you’re leaning toward opening a joint checking account with your partner, one of the following situations may sound familiar.

Yes, a joint account is right for you when …

  • You share common expenses. Some may find this method of managing joint expenses easier than tallying up what they each owe for groceries or the gas bill that month.
  • You have savings differences. When partners in a couple have uneven savings amounts, a joint account can help provide support in the worst-case scenario. “If the partner with more savings dies or becomes incapacitated, the other partner may need that joint checking account to pay the bills,” Tumin said.
  • You track spending. This may be ideal for couples who want to stick to a tight budget or who are working toward big savings goals, such as buying a home.

No, a joint account isn’t right for you when …

On the flip side, there are certain scenarios that may make a couple decide against opening a joint checking account. If either of these situations applies to you, you may find it better to keep a separate checking account for the time being.

  • You lack trust. “Since joint account owners have equal rights to the account, it’s important that you trust the other owner,” Tumin warned. “One partner could drain the joint account for his or her own gain.”
  • You’re uncomfortable with savings differences. Having a joint checking account can be a good way to provide security with less savings. However, not everyone may feel ready for this. “If one partner has significantly more savings than the other, the partner with more savings may want to maintain one or more individual accounts in addition to the joint account,” Tumin said. “This can impact how funds are divided in a divorce.”

Methodology

Using microdata from the Federal Reserve’s 2019 Survey of Consumer Finances, analysts calculated the types of checking accounts held by couples with at least one account, as well as the average balances in the respective accounts. The analysis was limited to accounts that were held jointly or individually by partners, excluding accounts held by other family members or jointly with people outside of the couple.

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More Than a Third of Working Americans Experienced a Pandemic Pay Cut

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More than a third of full-time American workers have had their pay cut because of the coronavirus pandemic, according to the latest MagnifyMoney survey.

We surveyed nearly 1,000 full-time American workers to gain a better understanding of pay cuts, pay raises and bonuses over the past year — and in the next year. The news isn’t all bleak, though. While many workers experienced a pay cut, more than half of full-time workers have received a pay raise in the past year — even though 8% fewer workers received one than in the previous year.

Key findings

  • Just over a third (34%) of full-time workers experienced a pay cut due to the coronavirus pandemic. While men and women experienced pandemic pay cuts at nearly equal rates, men (52%) were more likely than women (44%) to say their pay has been restored.
  • 54% of full-time workers received a pay raise in the past year, down from 59% in our 2019 report. Of those who got a raise, half were surprised by it, while a quarter asked for it.
  • More men (58%) received raises than women (48%). Additionally, men who received raises were more likely to be promoted compared to women.
  • The number of working Americans who think they’ll get a pay raise next year dropped by 17%, from 47% in 2019 to 39% in 2020.
  • 28% of workers said their company made changes to bonuses amid the pandemic. In fact, 15% reported their company decided not to grant bonuses this year, while 13% said their bonus was reduced.

37% of full-time workers have experienced pay cuts in past year

As many would suspect, a large amount of pay cuts in the past year were pandemic-related. Of the 37% of full-time workers that experienced pay cuts in the past year, the cuts for 34% of those workers were because of the coronavirus pandemic.

Men and women experienced pandemic pay cuts at similar rates, but men were more likely than women to report having their original pay rate restored. Overall, 52% of Americans working full time who experienced a pay cut said their pay hasn’t yet been restored.

There was a significant age gap regarding pay cuts, though. Millennials (38%) were the most likely generation to experience a pay cut because of the pandemic, compared with:

  • 32% of Gen Xers
  • 20% of baby boomers

There is some good news for millennials, though, as 53% had their pay restored after it was cut.

“It’s definitely encouraging to hear that millennials are likely to have their pay restored after a pay cut, as a lengthy cut in pay can cripple one of the more financially vulnerable generations,” said Sarah Berger, MagnifyMoney’s millennial finance columnist.

“Many millennials are struggling with crushing student loan debt and a weak job market at a time when many are also likely considering making serious financial decisions, such as buying a home, getting married and having children,” she added. “It’s essential for millennials and other young generations to be on solid financial footing before they make these big purchases.”

8% fewer workers received pay increases than in previous year

More than half of full-time workers received a pay raise this year. This is good, but it’s a notable drop from the previous year.

MagnifyMoney asked full-time workers some of the same questions about their salaries in a 2019 survey and found that 59% of respondents received a pay raise, versus 54% in this year’s edition — a decrease of 8%.

Of the Americans working full time who received a pay raise in the past year, nearly half (46%) said they got it via their current job, while 8% said they got it when they switched jobs.

As shown in the graphic above, more men (58%) than women (48%) received raises in the past year. Men also received more raises in our 2019 report, but to an even greater extent — 64% of men, versus 52% of women.

Millennials were more likely than Gen Xers and baby boomers to receive pay raises. However, while millennials are often accused of job hopping, only 12% got a pay bump by switching jobs.

50% who received pay raises were surprised by them

One in 2 of those who received a raise were surprised by it, while an additional 1 in 4 asked for it. Plus, just over 1 in 4 (26%) received a cost-of-living increase, but they weren’t surprised to receive it.

Men who got raises were more likely than women (27% versus 21%) to ask for them.

As well, nearly half (49%) of those who got a raise also got a promotion. Breaking it down by gender, 54% of men who received raises were also promoted, versus just 42% of women.

56% boosted retirement contributions after pay increased

More than half of those whose pay increased in 2020 put their newly increased income to good use by upping their retirement contributions.

This was lower than last year’s report, when 62% boosted their retirement contributions — a 10% decrease.

Men who got raises were slightly more likely than women (58% versus 52%) to increase their retirement contributions. More millennials (55%) and Gen Zers (56%) increased their retirement savings, but baby boomers (40%) held back a bit more.

Automation is ‘fool-proof way’ to make sure you’re increasing contributions, our expert says

Consistent retirement contributions are key to saving successfully for retirement.

“Dialing up your retirement contributions on a regular cadence will only help you in the long run,” according to Berger. The more you contribute, the more you can earn in compounding returns.

Berger recommends automating retirement savings contributions to keep the process simple and to continuously make progress. Many retirement plans allow you to select an automatic escalation setting in which your contributions are increased by a certain percentage point every year.

“This is a fool-proof way to make sure you are consistently increasing your contributions,” she said.

39% of workers think they’ll receive raise in next year

Looking forward to 2021, 39% of full-time workers are optimistic they’ll receive a pay raise in the next year. As positive as these numbers seem, though, this is still a negative shift from the previous year. The percentage of full-time workers who think they’ll get a pay raise next year dropped 17%, from 47% in 2019 to 39% in 2020.

Men (43%) are more likely than women (32%) to believe they’ll receive a raise in the near future. Similarly large gaps exist among the generations as well. The following think they’ll receive raises in the next year:

  • 44% of millennials
  • 36% of Gen Xers
  • 22% of baby boomers

50% of workers received — or expect to receive — bonus in 2020

Happily, 23% of full-time workers received — or expect to receive — a bonus for the amount they envisioned. While some workers (35%) reported they don’t typically receive bonuses, 15% of workers who typically get bonuses won’t be receiving one this year specifically because of the pandemic.

Here’s a further breakdown:

More than 4 in 10 (42%) women said they don’t typically receive bonuses, versus 3 in 10 men. But of those who do typically receive them but won’t be getting one because of the pandemic this year, there was a more even split (15% of men, versus 16% of women). When it comes to the different generations, millennials (25%) were the most likely to receive or expect to receive their typical bonus, followed by:

  • 21% of Gen Xers
  • 15% of baby boomers

“The coronavirus pandemic has crippled many businesses in the U.S., many of which have been forced to close for good,” Berger said. “Understandably, many companies are cutting back on bonuses in 2020.”

4 things you can do if you receive a pay raise or bonus

  • Put the money in a high-yield deposit product. If you want to deposit your raise or bonus, opt for an account with a high yield. This could include certificates of deposit (CDs), high-yield online savings accounts or cash management accounts offered by fintech companies.
  • Build an emergency fund. If you don’t already have an emergency fund ready to cover a job loss or unexpected expense such as a car repair or medical bill, having an emergency fund can be a good idea, especially amid a pandemic. At a time when many are having to raid their emergency funds, though, this isn’t always a possible option.
  • Research online banks. When building out your emergency fund — again, if possible — it can be worthwhile to research online banks that may offer higher interest rates than brick-and-mortars. MagnifyMoney offers a list of its best online banks in 2020.
  • Invest your money. Rates for deposit accounts have been hitting rock-bottom lows, Berger noted, so the market can be the perfect place to put your money to work. A financial advisor could help start you on the right path.

Methodology

MagnifyMoney commissioned Qualtrics to conduct an online survey of 984 Americans who are currently employed full time. The survey was fielded Nov. 6-11, 2020.

Generations are defined as the following ages:

  • Millennial: 24 to 39
  • Gen X: 40 to 54
  • Baby boomer: 55 to 74

The survey also included responses from members of Generation Z (18 to 23) and the silent generation (75 and older). Due to the low sample size among both age groups, their responses were factored into the overall percentages but excluded from the generational breakdowns.