Entering a new year is a time many begin setting goals for themselves. Time and time again, people start the year saying they are going to save more and spend less, so as 2020 begins, savings is once again top of mind.
While many consumers set this goal, the state of savings in America shows it can be a difficult one to achieve. In fact, Bankrate conducted a survey that found more than one in five employed Americans do not save any money for retirement, emergencies or other financial goals. As MarketWatch explained, “The American consumer loves to consume.”
The Federal Reserve has also repeatedly reported that an unexpected $400 expense would cause many Americans to struggle financially. With the state of savings as it is, it is imperative that consumers gain a better understanding of personal finances. Financial professionals have an opportunity to educate consumers on best practices that will help them save, and one place to start is with an emergency fund.
A Safety Net
Having an emergency fund is essential to financial and personal health, because it makes life’s accidents easier to handle and much less stressful. These funds allow consumers to pay for expenses that seem to come out of nowhere without having to go into debt.
Expressing the importance of creating an emergency fund to consumers will not only provide them with a financial safety net in times of crises, but it will also improve their mental well-being. One study found that those who suffer from mental illnesses such as depression and anxiety are three times more likely to have debt. And, online therapy company Talkspace reported that feeling like one cannot fix problems due to lack of funds can add stress that hurts a person’s overall mental health.
With financial strain affecting consumers’ mental health, the healthcare industry has seen some of the largest impacts of America’s saving crisis. Researchers at UT Southwestern conducted focus groups to see how financial struggles can change the way consumers take care of themselves. Nguyen found that “financial strain can cause nonadherence to physician recommendations that appear to reflect a patient’s lack of engagement in care. However, this ‘nonadherence’ is actually the result of rational and difficult trade-offs to cope with financial strain.”
Clearly, the state of savings in America is in such a place that its impact is trickling into other industries. Financial institutions can combat this issue by helping consumers save.