Last Modified on March 27, 2020

People spend their entire lives in the constant endeavor of building wealth. Money drives the world. It is, thus, necessary to have a sound understanding of the methods to earn and invest money. Moreover, there are also some other surprising money statistics that you should always know and keep a tab on. The more you understand money, the more you can own. 

6 Surprising Money Statistics That You Need to Know

1. Poor saving habits

Studies indicate that approximately 65% of Americans live from one paycheck to another. This trend is not just limited to young people or those who have just started their career. Most Americans are left with as little as $ 800 towards the end of each month, which is barely enough to get them to the next paycheck. These statistics present an alarming fact, as most people are not financially prepared to tackle unforeseen money emergencies. This unpreparedness tends to increase its debt. 

Taking a clue from this report, you should try to reduce your expenses and keep aside an emergency fund. As a rule of thumb, your emergency fund should have enough to last you three to six months.

2. Meager retirement funds

Disturbingly, 45 % of Americans have not saved any money for retirement. The remaining population has saved an average of $ 60,000. Retirement planning is a very important component of financial planning. Most Americans don’t realize that their post-retirement life can be 30 to 40 years long. Social Security Benefits and Medicare are not enough to sustain a comfortable lifestyle for so many years.
Retirement accounts like 401 (k)s and Individual Retirement Accounts (IRAs) are easy ways to start saving. Most companies provide these options to their employees and deduct a percentage of their paycheck as monthly contributions. Here is a calculator to determine how much you need to save for retirement, so you can set the financial goals for yourself. 

3. Credit card dependency

Without enough emergency funds, people in America depend a lot on their credit cards. As per a report published by Forbes, Americans spent close to $ 104 billion in credit card debt in 2018. These statistics have also brought an increase in the rate of interest. Credit cards these days charge an average of 15.5% interest on the debt. In fact, credit card debt has shown a 35 % increase in the last five years and interest rates are expected to rise in the coming years. More youngsters, including a high percentage of high school students, have credit card loans these days. An average American has close to 13 outstanding credit obligations.

Credit card loans are a huge set back to your savings because you spend extra money on interest. Using a credit card should be your last resort and used only if you have exhausted your savings and emergency fund. 

4. Insufficient emergency fund

Naturally, the dependency on credit cards comes from the absence or scarcity of emergency funds. As per a survey conducted in 2018, only 39% Americans had an emergency fund of $ 1000, while 34% had no emergency fund at all. The lack of enough emergency funds leads to an increased credit loan.
19% of Americans use a credit card in emergencies. A sudden financial emergency can make you go bankrupt. The only way to break the vicious cycle of credit debts is to maintain a steady emergency fund. 

5. Skyrocketing student loans

Just like credit card debt, most Americans grapple with student loans. Reports show that people well into their 40s have an approximate $323 billion student loan debt left to pay off.
With age, you are likely to have newer debts like mortgage, car loans, etc. Thus, you should try to pay off your student loans as early as you can in your career.

6. Unnecessary expenses

Here are some shocking facts about American spending habits: 

• USA Today reported that Americans have more TV sets in a home than the number of family members.

• Forbes magazine published a report stating that an average family spends $ 1700 on clothes each year with women owning a separate outfit for each day of the month.

• National Association of Home Builders found that the size of American homes has increased by 10% in just one year (2017- 2018). There has been a 74% increase since the 1910s. As a result, there has also been a rise in realtor fees, maintenance and electricity costs, mortgage, etc.

• As per a report published by the University of California, American children own at least 40% of all the toys produced globally. An average 10-year-old has more than 200 toys.

• According to a study published by The Wall Street Journal, people in America spend close to $ 1.2 trillion on avoidable products and services like the lottery, gambling, grocery items, shoes, etc.

Minimalism and frugality play a very important role in financial planning. If the above expenses are reduced, the money from these savings can be used to invest. Investing just $ 100 can bring huge returns in just a few years. Try to cut down on unnecessary expenses and use the savings to grow your money. 

To sum it up

These statistics not only present a picture of American money habits, but also serve as guides for better financial planning. Try to make a note of these facts and make sure you don’t make the same mistakes. Earning money is important, but it is more important to save, spend, and invest this money wisely. 

Are you falling prey to similar mistakes? Reach out to financial advisors for advice on how to manage your income so you can maximize your wealth.