Strong COVID-19 Rebound Helps Vermont Lead the Best States for Saving Money

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Updated on Monday, August 23, 2021

Saving money is the foundation of pretty much all financial advice. Fruitful savings can help consumers avoid debt, earn passive income and work toward financial goals like buying a house, not to mention having emergency funds available.

But most Americans, for various reasons, don’t have much saved — and the COVID-19 pandemic has certainly made this situation worse for some. In October 2020, 42% of consumers had less than $5,000 in emergency savings. Some of those reasons for low or nonexistent savings may include high housing costs or low and stagnant wages — both factors that may change for an individual if they moved to another state.

MagnifyMoney researchers examined U.S. Census Bureau and U.S. Bureau of Labor Statistics (BLS) data to create a scoring system to rank the best states for saving money based on seven metrics:

  • Down payment-to-income ratios
  • Housing costs as a percentage of income
  • Homeownership rates among adults younger than 45
  • Month-over-month job growth
  • Year-over-year job growth
  • Wage growth
  • State unemployment rates

Key findings

  • Vermont ranks as the best state for saving money. Though it doesn’t offer the most affordable housing, strong wage growth, one of the best year-over-year job growth rates and one of the lowest unemployment rates in the country suggest consistent opportunities to earn decent money — and build savings.
  • The Midwest dominates the 10 best states for saving. Six Midwest states — Minnesota, Missouri, Iowa, Indiana, Wisconsin and Nebraska — land in the top 10, due much in part to affordable housing.
  • Alaska finishes at the bottom as the worst state for saving money. Poor job and wage growth, combined with relatively unaffordable housing when compared to local earnings, make it tough for those trying to bolster their savings.
  • Coastal states may not be the best options for consumers looking to build savings. All three West Coast states and three on the East Coast — plus the District of Columbia — land among the 10 worst states for saving money.

Vermont is the best state for savers, though the Midwest offers several budget-friendly options

It turns out the Green Mountain State might be good for stacking a mountain of green cash as strong wage growth and a low unemployment rate help Vermont rank as the best state for saving money.

Job growth in Vermont — both month over month from April 2021 to May 2021 and year over year from May 2020 to May 2021 — has been better than average amid the pandemic recovery.

With the job market recovering a bit, Vermont’s labor force grew by 0.6% from April to May 2021, faster than the 0.1% average across the 50 states and District of Columbia. Year over year, the state has posted a 10.1% job growth rate, complemented by a 2.6% unemployment rate — second-lowest in the U.S. behind bordering New Hampshire.

Jobs and income potential in top 10 states for saving

RankState

Job growth (April 2021 to May 2021)

Job growth (May 2020 to May 2021)

Wage growth

Unemployment rate

1Vermont

0.6%

10.1%

8.4%

2.6%

2Minnesota

0.4%

8.9%

4.9%

4.0%

3Kentucky

0.3%

10.2%

3.1%

4.5%

4Missouri

0.2%

7.4%

7.2%

4.2%

5Iowa

0.1%

6.8%

3.6%

3.9%

6Indiana

0.1%

8.8%

2.8%

4.0%

7Wisconsin

0.1%

8.3%

3.8%

3.9%

8Maine

-0.1%

9.5%

7.1%

4.7%

9Nebraska

-0.1%

6.3%

6.0%

2.6%

10New Hampshire

0.0%

11.4%

4.9%

2.5%

Vermont’s median housing costs — 38.4% of median income — exceed the common recommendation of 30% of monthly income for a healthy budget. However, many young adults have still managed to achieve homeownership. Of households headed by adults younger than 45, 51.9% own their homes.

Save on housing in the Midwest

The Midwest has six of the 10 best states for saving money, including No. 2 Minnesota with the highest homeownership rate among adults younger than 45 at 58.4%. Kentucky then breaks up the Midwest stack at No. 3, due in part to its low housing costs.

Among the top 10, Kentucky and Iowa stand out as the only states where median monthly housing costs fall below 30% of median income — 29.0% and 29.1%, respectively. The other Midwest states in the top 10, along with Kentucky, report housing costs hovering around 30% of the median income or just over, but housing in the Northeast states ticks up a bit.

Folks in Maine — ranked No. 8 among the best states for saving money — may see housing costs eat a median 32.2% of income, but that’s less than New Hampshire, where rent or mortgage payments equal an average of 40.2% of median monthly incomes.

Housing costs in the top 10 states for saving

RankState

Percentage of median monthly income going toward housing costs

Number of years of income needed for a down payment

1Vermont

38.4%

1.31

2Minnesota

32.9%

1.20

3Kentucky

29.0%

0.94

4Missouri

30.0%

0.97

5Iowa

29.1%

0.89

6Indiana

30.5%

0.92

7Wisconsin

30.8%

1.06

8Maine

32.2%

1.14

9Nebraska

31.0%

0.96

10New Hampshire

40.2%

1.37

Looking to save? Avoid the coasts

While all three states along the West Coast — Washington, California and Oregon — find themselves among the 10 worst states for saving, the East Coast contributes an equal number of states, plus the District of Columbia.

Bottom 10 states for saving

Rank

State

1

Alaska

2

Florida

3

New York

4

District of Columbia

5

Virginia

6

Washington

7

California

8

Oregon

9

Louisiana

10

Arizona

It shouldn’t be surprising that Alaska ranks at the bottom of the rankings due to relatively high housing costs, slow job growth and a high unemployment rate.

The Last Frontier may boast unbeatable sights, but slower-than-average, year-over-year job growth at 7.5% may make Alaska a bit less attractive to hopeful savers.

Additionally, Alaska’s 6.7% unemployment rate surpassed the national rate — 5.8% — in May 2021. Though 48.4% of adults younger than 45 own their homes, they may be struggling to keep up with housing costs that may eat into 38.4% of their median monthly incomes.

Housing costs in the bottom 10 states for saving

RankState

Percentage of median monthly income going toward housing costs

Number of years of income needed for a down payment

1Alaska

38.4%

1.39

2Florida

42.5%

1.54

3New York

39.4%

1.63

4District of Columbia

33.9%

2.09

5Virginia

38.2%

1.43

6Washington

41.2%

1.86

7California

51.4%

2.87

8Oregon

42.1%

1.99

9Louisiana

30.2%

1.07

10Arizona

37.3%

1.49

Housing costs in Florida may run higher than Alaska at a median 42.5% of monthly income, but stronger wage growth — 1.8% — and lower unemployment — 4.9% — help the Sunshine State rank just above Alaska.

New York’s high median income helps offset the high housing costs, making them slightly more affordable at 39.4% of income than Florida, and helping make the Empire State a slightly better option for savers. New York’s job growth at 11.0% year over year beats the rest of the states in the bottom 10.

Louisiana offers the most affordable housing options in the bottom 10, both in terms of median monthly costs (30.2% of income) and years of median salary for a down payment (1.07). But having the third-lowest wage growth — 2.5% — and second-lowest year-over-year job growth — 5.6% — among the bottom 10 spells low potential for those hoping to capitalize on income to save in the Bayou State.

Jobs and income potential in bottom 10 states for saving

RankState

Job growth (April 2021 to May 2021)

Job growth (May 2020 to May 2021)

Wage growth

Unemployment rate

1Alaska

-0.4%

7.5%

0.5%

6.7%

2Florida

0.5%

7.0%

1.8%

4.9%

3New York

0.2%

11.0%

3.2%

7.8%

4District of Columbia

0.4%

3.1%

7.1%

7.2%

5Virginia

-0.1%

7.0%

2.7%

4.5%

6Washington

0.2%

8.1%

3.6%

5.3%

7California

0.6%

8.1%

7.7%

7.9%

8Oregon

0.4%

8.6%

3.7%

5.9%

9Louisiana

-0.3%

5.6%

2.5%

7.1%

10Arizona

0.4%

6.0%

6.1%

6.7%

The District of Columbia and California offer strong potential for wage growth at 7.1% and 7.7%, respectively, but a down payment on a median-value home in both locations takes more than two years of median annual salaries. The only state where that costs more in this regard is Hawaii.

Will a location change help you save?

Cutting costs is one of the most popular reasons consumers decide to move, but those considering a major change — like a different state — should consider their options carefully. A state that’s booming with jobs and wage growth now might not be a few years down the line.

The proliferation of remote work may be inspiring many folks to move to a cheaper or generally more desirable location, but MagnifyMoney senior director of content Ismat Mangla encourages those people to weigh all the factors.

“Will your company adjust your salary according to where you live?” Mangla asks. “If you have to leave this job, will there be other opportunities for you in your new area? Just make sure you’re going into a decision like that with a clear head and that you consider all the scenarios.”

Consumers struggling to save and unable to move to a more affordable area will need to be merciless about their budgets, Mangla says. She suggests a few steps you can take to build your savings:

  • Minimize unnecessary spending. Take a look at your monthly spending and look for recurring expenses you might be able to downgrade. Things like ATM fees seem small here and there, but they could add up in savings if you switch to a bank with fewer fees.
  • Make use of extra space. If your rent or mortgage payment is making it difficult to save, consider getting some help by renting out a room or finding a roommate. Sharing a bathroom might sound less than ideal, but it could be worth it if it helps you save for a bigger space.
  • Seek professional advice. Staying on top of your budget and finding the best financial moves for your goals isn’t easy on your own, especially if you’re not a professional yourself. Consider hiring a financial advisor to help with those important financial decisions.

No matter your situation, make sure your savings are always growing by making regular deposits in a high-yield savings account. Even a few dollars a week can grow with interest, helping you build a financial safety net and work toward your goals.

Methodology

MagnifyMoney researchers analyzed data on seven metrics to find the best states to save money.

  • Down payment-to-income ratio. This is 20% of the median home value (the typical amount needed for a down payment) divided by median annual earnings. This shows the number of years of income needed for a down payment. Data comes from the U.S. Census Bureau’s 2019 1-year American Community Survey.
  • Housing costs as a percentage of income. This is median housing costs divided by median earnings. Data comes from the U.S. Census Bureau’s 2019 1-year American Community Survey.
  • Homeownership rate for residents younger than 45. This measures the percentage of people younger than 45 who own their homes. Data comes from the U.S. Census Bureau’s 1-year 2019 American Community Survey.
  • Month-over-month job growth. This shows recent job growth, covering one month from April 2021 to May 2021. Data comes from the U.S. Bureau of Labor Statistics.
  • Year-over-year job growth. This shows job growth after the coronavirus pandemic began, covering one year from May 2020 to May 2021. Data comes from the U.S. Bureau of Labor Statistics.
  • One-year wage growth. Data comes from the U.S. Census Bureau’s 2018 and 2019 1-year American Community Surveys.
  • Unemployment rate. This covers May 2021. Data comes from the U.S. Bureau of Labor Statistics.

Analysts then ranked each state in each metric and found each state’s average ranking. Using this average ranking, researchers gave each state a final score. The state with the best average ranking received a 100, while the state with the worst average ranking received a 0.