When we read about consumer spending and saving habits, the news tends to lean toward the negative. Case in point: Earlier this year, I had to report that 57% of Americans have less than $1,000 in savings, while 39% have no savings at all.
It's therefore encouraging to get a piece of good news for a change: Apparently, 60% of Americans are making a conscious decision to limit their monthly spending. The reason? They're looking to increase their savings. That's the latest from a Bankrate study, which also found that 74% of younger workers aged 18 to 26 are acknowledging that they need to start putting more money away.
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The latter is particularly positive for one simple reason: Starting early offers workers the best chance to ensure that they have enough money to pay the bills in retirement. The Center for Retirement Research at Boston College estimates that almost half of working households don't have large enough nest eggs to cover their living costs once they stop working. The fact that a growing number of adults are making an effort to save is therefore a welcome change from the seemingly blase attitude we're all used to reading about.
We all need emergency savings
While saving for retirement should be a priority for workers of all ages, let's be clear: Before you start funding that nest egg, make sure you have an adequate amount of short-term savings to work with. Ideally, you should have anywhere from three to six months' worth of living expenses set aside for emergencies. This way, you'll have options should you lose your job or encounter a major unplanned expense.
If your emergency fund is lacking or nonexistent, work on completing it before you save for retirement. But once that fund is fully loaded, it's time to start thinking long term. And the sooner you do, the better.
Starting early: The key to retirement savings
You know those people who retire early and are constantly jetting off on cruises or frequenting the theater? Many of them didn't start out rich or inherit large sums of money from wealthy families. Rather, they made the same wise decision a good 60% of Americans are making today -- to spend less and save more.
The fact that younger workers are making a conscious effort to curb their spending is an added plus, because those are the folks who have the best chance of accumulating the most savings. Though younger workers may not earn quite as much as their older counterparts, they have one key weapon in their arsenal: time. And that's something you can't get back once you lose it.