Inflation has forced Americans to dip into their savings a bit, with the personal saving rate slipping to 5.1% in June from 5.5% in May, according to the government.
The unofficial news isn’t too great for July either. To be sure, LendingTree’s MagnifyMoney Savings Index showed that 42% of consumers saved money in July, up from this year’s low of 35% in June.
People wanted to sock money away before a possible recession. But that’s still the second-lowest percentage of the year. And 17% of consumers said they withdrew funds from their savings in July, the highest rate since December 2021.
On the bright side, the 42% saving and 17% withdrawal numbers are better than those in the past two years. In July 2021, just 37% saved money while 19% pulled from their savings. In July 2020, 40% saved money and 21% withdrew.
Consumers are able to save money now, but things may get worse, thanks to inflation, says Ken Tumin, editor of Lending Tree’s DepositAccounts blog.
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Inflation’s Influence
“Many consumers have been able to build up some savings, and now they’re focused on spending some of it rather than adding to it,” he said in a statement.
“If we don’t see a pullback in inflation soon, many consumers may feel forced to pull all or most of their money from savings to pay for more costly goods and services.”
A total of 31% of consumers say they’re saving for an emergency, up from 25% in July 2021. That likely stems from recession fears, MagnifyMoney says. A recent survey it conducted showed that 70% of Americans believe a recession is coming.
“A job loss becomes more likely in a recession, and an emergency fund is especially important when you lose your job,” Tumin said.
“A consumer’s emergency fund should afford them a few months’ worth of expenses. With high inflation raising expenses, consumers need to add more money to ensure their emergency savings are properly funded.”
Vacations, Retirement, Cars
After general savings and emergencies, the top destinations for consumer savings are vacations (24% of consumers), retirement (21%), new cars (17%) and the holidays (14%).
As for age breakdowns, a higher portion of Generation Z consumers (ages 18-25) added to savings in July than other generations: 61%.
That compares to 45% for millennials (ages 26-41), 35% for baby boomers (ages 57-76) and 32% for Generation X (ages 42-56).
Gen X tops the list of consumer who don’t have any savings — 24%. Gen X has the best score there — 13%
Men are doing better than women, perhaps because women are often underpaid and have more financial responsibilities than men. A total of 49% men saved some money in July, compared to 35% of women.
