by Elizabeth Aldrich | Updated July 17, 2021 - First published on Sept. 27, 2019
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Overcoming this one thing could drastically improve your quality of life.
We all love to pit millennials against baby boomers and Gen Xers against millennials, especially when it comes to responsibility. But amidst the arguments, there's one thing that all generations share when it comes to money. Unfortunately, our common financial ground isn't looking good -- in fact, the one thing that millennials, baby boomers, and Gen Xers all face in near equal measure is financial insecurity.
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Paying your bills on time, holding down a secure job, and stashing money away in a savings account are all traits of a stable middle class, according to our recent survey on how Americans define the middle class.
Unfortunately, these perceptions aren't necessarily the reality for many middle class Americans. Nearly half of those surveyed reported financial insecurity. Millennials feel the most financially insecure, with 51% reporting that they don't feel financially comfortable. However, Gen Xers and baby boomers aren't far behind, with 49% and 43% reporting financial insecurity, respectively.
Financial insecurity is a feeling of fear about one's own financial stability. And these results show that people who experience financial insecurity can come from all different backgrounds -- regardless of income and age, we're all capable of being scared about the future. The question is, what's causing so many Americans to feel insecure about money?
Another common theme across generations is living paycheck to paycheck, which is a reality for more than 2 in 5 middle class Americans.
Living paycheck to paycheck essentially means that 100% of your paycheck goes toward your living expenses. This means you don't have money leftover to put toward your savings -- and if an unexpected expense comes up, you'd be unable to pay for it without borrowing money.
Baby boomers are the most likely to live paycheck to paycheck, with 45% of those surveyed saying their money only lasted to the next payday. Roughly 40% of Gen Xers and millennials suffer from the same problem.
It's easy to see why living paycheck to paycheck would create a sense of financial insecurity. If you find yourself constantly draining your bank account before payday, what happens if your car suddenly breaks down or your pet needs to go to the vet? What if you end up in the hospital and need to pay for medical care? Without a savings cushion to dip into, what would you do if you lost your job tomorrow?
If you live paycheck to paycheck, these kinds of questions are likely running through your head on a regular basis. And with worries those kind of worries, it's no wonder that feelings of financial insecurity are common.
Ending paycheck-to-paycheck living is the first step to reaching financial security, and it starts with building an emergency savings fund. Having that cushion in your bank account to cover unexpected expenses or gaps in your income will greatly improve your financial peace of mind.
Of course, if you're living paycheck to paycheck, putting money into savings will require you do one of two things: cut your expenses or increase your earnings. Ideally, you could do both. Try to find areas in your budget where you can save money, and see if you can pick up a side gig or ask for a raise at work.
The easiest way to build a savings account is to pay yourself first. Set up automatic deposits into your savings account that will go out the day after you normally get paid. That way, the money comes out of your budget without you even having to think about it, and your savings accumulate on their own.
To boost your savings, open a free high-yield savings account. These accounts often offer interest rates that are 20 times higher than what you'd get at a traditional bank, so you can earn some rewards for your newfound savings habit.
Once you've built up a generous emergency savings fund -- at least six months of basic living expenses -- you can turn your sights toward bigger savings goals, like buying a home or retiring. You can also enjoy the feeling of financial security, and that is priceless.
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. The Ascent's picks of the best online savings accounts can earn you more than 8x the national average savings account rate.
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