It’s no secret that the average person in the United States isn’t necessarily concerned about saving and investing. Over the past 14 years, the national savings rate has been between one percent and eight percent – today that number stands at less than four percent, a considerably low number.
When it comes to having children, a lot more expenses are adding to household budgets. This is why financial experts and industry professionals urge families to start saving prior to having children in order to have emergency funds for a rainy day.
Are parents doing this? A new study has found that close to half of new parents are not.
BMO Harris Bank released the results of a new survey that discovered that nearly one-third (32 percent) of young family households haven’t saved any money at all for an unforeseen event. Also, an additional 11 percent have saved less than $1,000 for an emergency, such as a job loss or medical emergency.
Study authors point out that respondents understand that having cash reserves is an important element to start having family: 90 percent of U.S. adult respondents say having enough money to cover health issues is an enormous concern. The survey noted that the parents of a newborn child will spend nearly $10,000 in medical costs for the first year of a child’s life.
Of course, it’s not only parents with young children who are struggling financially. Americans who plan on having children within the next five years have an average of $5,523 saved up, but less than one-third (30 percent) of those individuals have zero saved.
The survey concluded that 26 percent of current parents and 15 percent of future parents have $10,000 saved up for an emergency. One BMO Harris executive suggests that households need to start thinking long-term in order to start saving and investing for the future and to meet whatever needs they may have.
“The challenge with saving for a financial emergency can often be that until it's right in front of you, you may be thinking only about the more immediate costs of raising a family," said Alex Dousmanis-Curtis, director of retail banking at BMO Harris Bank, in a statement. "As a framework to start out, parents should think about having between three and six months of their pretax income set aside."
How can individuals start saving more? Here are some tips:
- Pay yourself first
- Research saving and investment strategies (Guaranteed Investment Certificates, My Binary Coach, mutual funds, automatic high-interest savings plans)
- Change your expensive daily habits
- Avoid banking fees (ATM charges)
- Pay down debt
- Take on a part-time job, sell stuff you don’t use
- Use coupons and dollar stores for household items
- Cut back on vices, gym memberships, entertainment and meat