Report on the Economic Well-Being of U.S. Households in 2014
Print- Preface
- Executive Summary
- Introduction
- Overall Economic Well-Being
- Housing and Household Living Arrangements
Savings and Spending
An important measure of economic well-being is whether respondents feel that they have sufficient income to cover their expenses without incurring debt. To capture the extent to which individuals feel that they are able to both pay for expenses and save for the future, the survey asks a series of questions related to their spending and their level of savings.
Most respondents report that they saved at least some of their income in the past year, although a sizeable minority indicate that their spending exceeds their income. The survey also demonstrates that spending and savings behaviors differ greatly by income, as lower-income respondents are less likely than higher-income respondents to be saving and more likely to be spending more than they make. Additionally, lower-income respondents who manage to save are more likely to be doing so for short-term needs, such as unexpected expenses, rather than long-term events, such as retirement.
Spending Relative to Income
When asked how their spending compares to their income, 41 percent say that they spent less than they made in the past year and 37 percent report that their spending was equal to their income. However, one-in-five respondents report that their spending exceeded their income.
Lower-income respondents are more likely to report that their spending exceeded their income than those at higher-income levels, as over a quarter of respondents with incomes under $40,000 indicate that their spending exceeded their income (figure 10). For some respondents, this may be indicative of an inability to finance a reasonable standard of living at their current salary. However, the survey also offers evidence that the higher level of debt-financed or savings-financed consumption among low-income respondents may be related to economic hardships. Among low-income respondents who did not experience an economic hardship in the past year, 18 percent say that their spending exceeded their income. However, among low-income respondents who experienced a hardship, 46 percent say that their spending exceeded their income.
Although responses to this question vary by income, they do not vary much by age. Respondents ages 18 to 29 and ages 30 to 44 are each equally likely (22 percent) to report that their spending exceeds their income. This is only slightly higher than among those ages 45 to 59 (19 percent), and those over age 60 (18 percent).
Figure 10. In the past 12 months, would you say that your household's total spending was more, less, or the same as your income? (by household income)
Savings Rate and Reasons for Saving
The survey obtains additional detail on individuals' savings rates by directly asking respondents who are not fully retired what portion of their income was set aside as savings. This question specifically asks respondents to include 401(k) savings and other retirement savings facilitated through work, thereby prompting them to consider savings more broadly than just funds saved out of their take-home pay.
Considering this broad savings measure, 62 percent of respondents who are not fully retired indicate that they saved at least a portion of their income in the past year, while 30 percent say that they saved nothing and 8 percent did not specify the amount saved. Among respondents who did save, the average savings rate was 15 percent and the median was 10 percent.
Reflecting differences in disposable resources, the likelihood of saving is closely related to one's income. Thirty-nine percent of respondents with a household income under $40,000 per year saved some of their income in the past year, whereas 67 percent of those in the middle income group and 79 percent in the highest income group indicate that they saved a portion of their income (figure 11). However, among those who saved at least a portion of their income, there are few differences in the average rate of savings, with those of all three income categories saving an average of 14 to 16 percent and a median of 10 percent of their income.
Note: Among respondents not currently retired.
Return to textThe survey asks those who saved to select all of the applicable reasons for why they were saving. The top reasons for saving are for their retirement (57 percent), unexpected expenses (57 percent), and "just to save" (50 percent).
The frequency of these common reasons for saving differ, however, based on where respondents fall in the income distribution (table 9). Among savers making over $100,000, retirement is the most commonly cited reason for saving--mentioned by 70 percent of respondents. This exceeds the 58 percent in this income group who are saving for unexpected expenses. The middle income category of respondents who saved some of their income say they are saving for retirement (54 percent) about as frequently as unexpected expenses (57 percent). However, among respondents who saved some of their income and make under $40,000, only 37 percent say that they are saving for retirement, compared to 53 percent who are saving for unexpected expenses.
| Less than $40,000 |
$40,000- $100,000 |
Greater than $100,000 |
Overall | |
|---|---|---|---|---|
| Retirement | 37.4 | 54.2 | 70.1 | 57.1 |
| Unexpected expenses | 53.2 | 57.1 | 58.0 | 56.7 |
| Just to save | 49.5 | 50.0 | 51.4 | 50.4 |
| Pay off debts | 28.5 | 31.4 | 25.4 | 28.6 |
| Your children | 22.3 | 24.3 | 27.1 | 25.0 |
| Major appliance | 25.0 | 25.0 | 21.6 | 23.7 |
| Education | 15.8 | 15.7 | 24.8 | 19.2 |
| Home purchase | 18.5 | 17.7 | 13.6 | 16.3 |
| Taxes | 11.5 | 13.4 | 20.3 | 15.7 |
| Leave inheritance or charitable donation |
7.8 | 8.1 | 11.6 | 9.3 |
| Other | 4.9 | 3.5 | 4.1 | 4.0 |
| Total number of respondents | 2,587 |
Note: Among respondents who report saving some part of their income.
