People try to save but fall short of goals, Pew study says

WASHINGTON, D.C. (1/29/07)--The personal savings rate in the U.S. is a negative number, yet 77% of Americans think of themselves as the kinds of people who "always look for ways to save money" (Pew Research Center Jan. 24).

How can that incongruity exist? According to a nationwide survey of 2,000 adults conducted in the fourth quarter of 2006 by the Pew Research Center, Americans try hard but fall way short of their savings goals.

And it's not a real surprise to consumers that they don't save enough. In fact, two-thirds of respondents admit they don't save enough and more than one-third say they often or sometimes spend more than they can afford.

Not surprisingly, the survey shows that the less income people have, the more trouble they have with saving and spending. People with lower incomes are more likely to have credit card debt, more prone to worry about money and more likely to have arguments about money with a spouse.

Only Americans age 65 and older are more likely to say they have saved and invested enough, to say they do not worry about money, and to say they don't worry about how much they spend.

Across all other groupings--minorities in low and high income categories, high-income and low-income men and women, blacks and whites and Hispanics, married people and single people, employed and unemployed, college graduates and those with less education--all are likely to say they do not save enough.

What are their most common spending problems? While people list big ticket items and unexpected expenses as problems, they also have trouble with splurge spending. People say they most often splurge on food and dining out, followed by entertainment and recreation, and then shopping and personal items. Big ticket items--homes and cars--present big spending problems.

Today's negative savings rate--spending more than we earn--is atypical. As recently as the early 1980s, Americans, on average, saved more than 10% of their after-tax earnings, according to the U.S. Commerce Department's Bureau of Economic Analysis.

Still, the median financial wealth of families in this country continues to rise--fueled by increases in the value of consumers' homes and their stock holdings. But the Pew study offers marginal support for that viewpoint, as only about half of respondents say their home values have increased "a lot" in the past few years.

Take advantage of five easy ways--now--to boost your savings:

Identify leaks. Track where your money goes and plug those spending leaks. If you're forking out several hundred dollars or more on fast food and soft drinks each year, find less expensive alternatives and put the difference in your savings.

Pay yourself first. Don't wait to see what's left at the end of the month. Put a set dollar amount or percentage of your take-home pay directly into savings before you have a chance to spend it.

Pay on time. You'll avoid costly late fees that can add up over time. Late payments also can hike your credit card interest rates--even on cards you pay on time.

Automate it. Set up direct deposit of your paycheck, payroll deduction, and auto bill-pay through the credit union.

Save your refund. Plan to put your tax refund directly into savings. New rules for tax year 2006 allow you to direct deposit your refund into as many as three accounts.