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Published On: Thu, Aug 3rd, 2017

Revealed! Most Americans Don’t Save, but Loan the Government $200-300 Monthly

According to a study conducted by Bankrate, at least 66 million Americans don’t have any savings dedicated to emergency expenses. However, this scenario cuts across both poor and middle-class households in-discriminatively. Surprisingly, the Federal Reserve reported that 47% of all Americans are not ready for a $400 emergency expense.

In spite of the evident lack of financial cushion, a significant number of Americans give the federal government $200-$300 every month. From a financial point of view, this is a miscalculated financial move and it needs to come to an end.  

photo TaxRebate.org.uk

Americans have a serious savings shortage

To further illustrate the shortage of savings among Americans, GoBankingRates.com carried out a study that involved 5000 individuals. The survey indicated that only 28% of the population has over $1000 in savings separate from a retirement plan. From the reports, it is obvious that Americans need some liquid and easily accessible funds in preparation for emergency situations. Although an emergency fund is very effective when dealing with sudden medical, automobile or home repairs, the practice of saving for a rainy day is absent among most citizens.

Savings through the IRS

While the studies report exactly what is happening in the US, they can easily imply that the citizens have poor saving skills. In reality, Americans are very good at saving money but the problem is that they are not saving where it matters. Most people from the poor through to the upper middle class are constantly saving with the IRS and most financial experts agree this is a misplaced priority which works against your own financial welfare. The tax returns data show that at least 75% of all accounts received a refund. The average amount refunded is $255 per month which is tax-free lending to the government which is inaccessible until the money is repaid through annual tax refunds.

Considering the amounts involved, most citizens must be spending the funds on big purchases like vacations, expensive home appliances or furniture. Otherwise, the money should be showing up as dedicated savings in previous financial statistics. Using the IRS as a savings mechanism cuts across all income levels and the lowest annual refund received is $2625 while the highest refund was $4264.

The savings problem can be easily solved

The average American saves between $200 and $350 per month with the IRS. These amounts are spent annually after tax returns. This indicates that people without an emergency fund can build one without the unnecessary lifestyle disruptions. If you are in this bracket, you only need to make some small adjustments to your paycheck tax withholding then direct the extra money to a dedicated savings account.

If you are not sure about your ability to manage the fund, it’s advisable to set up a separate account with your bank. Normally, a standing order can automatically deduct the agreed amount from the primary checking account. When you adopt this method, you can spend the money as before but it also serves as a financial cushion should you choose to forego the previous annual expenditures. From the statistics above, the new savings account will have a few thousand dollars by the first year which is readily available.  

The consistent absence of savings among the American people has been a popular headline over the recent years. It’s disappointing to realize that although the story points to a significant exposure to financial disasters, the status quo has remained. But when you reflect on the situation keenly, you awake to the revelation that most of these cash strapped families have accounts with the IRS. This qualifies for the perfect self-sabotage. How can you have thousands of dollars in a nonliquid account when you don’t have an emergency fund?

Anyway, the remedy is simpler than imagined. By a simple diversion of the same funds to a dedicated savings account, you can surely build a solid fund. This will eventually eliminate the need for expensive payday realisticloans.com, risky title loans as well as maintain low balances on your expensive credit cards.

Final words

If you can stop giving interest-free money to the government, you stand a chance to have the financial flexibility you deserve. While the shift takes a few moments and zero cash investments, it will greatly improve your financial stability. In addition, you will no longer receive the money after tax returns but rather, the money is at your disposal whenever a need arises.

Making a positive change to your personal finances requires a well-made up mind and a mindset shift. But considering that you are barely making any major lifestyle adjustments, there is nothing to stop you. All that is needed is committing some time to adjust your account. Later, you will be happy to realize you have ended a self-inflicted financial problem.

Author: Eric Brown

Photo/donkeyhotey donkeyhotey.wordpress.com

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