From bygone passbook accounts with their hand-stamped tallies to CDs to stashes of cash in the mattress, people have long used a variety of methods to save money. Now, research from TD Bank shows the percentage of those who save is dropping and doing so quickly. And, perhaps for the first time in history, youths can give their elders a good talking-to about thrift.
According to a recent national report from TD Bank, the percentage of Americans who have savings accounts has dropped 17 percent between 2013 and 2014.
Despite the decline, the research found that millennials ”” those born after 1984 ””may be saving better than their older counterparts: 59 percent said they have savings or investments they could draw from if they were to experience an extended period of unemployment or income loss, compared with 54 percent of Gen Xers, those born between 1965 and 1984.
Mauro Decarolis, market president for Connecticut for TD Bank, responded to questions about the survey.
FCBJ: Why has there been such a marked decline in savings 2013-14 (from 83 percent to 70 percent)?
Decarolis: “Debit cards and online banking are playing central roles in the banking behaviors of today”™s consumers ”” a traditional savings account may have less value to consumers today who are focused on immediate access to their money, via ATM, or for those who value the convenience and safety of using a debit card, rather than cash, for their purchases.
“We also know from our own research that one in five consumers with a bank account today are using alternative banking products ”” like check cashing services or money transfer agents, so there are multiple factors contributing to consumers”™ declining need for a savings account. In order to budget and save, however, using both a checking and savings account is a best practice ”” especially if the consumer sets up a regular automatic transfer of funds into their savings account.”
FCBJ: Millennials (59 percent) say they have savings or investments that can be drawn upon, compared with only 54 percent of Gen Xers. Why do you think a younger generation would save at a greater rate than their elders? Is this a first?
Decarolis: “Millennials were impacted by the recession differently than their parents ”” while they may not have been directly affected they watched parents and relatives lose their jobs, struggle to make mortgage payments or deplete savings in order to make ends meet.
“Millennials themselves were faced with a challenging job market marked by a scarcity of jobs and low starting salaries. Furthermore today”™s college graduates have an average of $30,000 in debt, forcing them to factor large school loan bills into their finances. All of these factors have contributed to a generation that is hyper-aware of money and finances.
“It would be accurate to say that this is the first time a younger generation is more apt to save than what we would expect to see in the, typically more conservative, older generation. Similar to millennials and their propensity to save, we see a lot of Gen Xers reject the idea of credit cards; when it comes to personal debt they”™re quite averse to adding more and tend to make purchases in cash.
“As the disparity between the affluent and economically challenged areas of Fairfield County relate to our findings on spending and saving ”” while the local millennial generation is more likely to save on the whole, we would expect that millennials in the affluent areas are more likely to have the ability to save and invest than those in the more challenged economic areas.”
