Here's How Much Money the Average American Is Saving Up. How Do You Compare?

How much do you bring home a month, and what percentage of that do you manage to tuck away in savings? If it's more than 4.5%, you're currently saving more than the average American citizen. For decades, the personal savings rate averaged between 10% and 14%, but the numbers began to drop around 1985. By 2005, the rate was down to 2.9%. Here, we look at why we don't seem to be able to save more money.

It's not just one thing

If we could point to one thing to explain the low savings rate -- like the pandemic, inflation, or rising interest rates -- it would be far easier to make changes. However, countries like the United Kingdom and Canada face the same issues, with a few extras thrown into the pot. And yet, households in the United Kingdom are expected to save around 8% this year and Canadians should hit a 6% savings rate.

There has to be more to the story.

In 2019, only 29% of Americans considered themselves financially healthy, and things have not improved much since that time. Today, a whopping 70% of us admit to being stressed about personal finances, according to a CNBC Your Money Financial Confidence Survey. The same survey found that 58% of Americans are living paycheck to paycheck. Given those statistics, a lack of savings comes as no surprise.

But why? What's keeping us from building an emergency fund or planning for retirement? It's likely a multitude of factors, but here are four of them.

1. We're slammed with advertising

While the number seems unreal, research shows that the average American is exposed to 4,000 to 10,000 ads per day. We may not even notice them, or we may believe we're not paying attention. But every time we scroll social media, use a search engine, listen to a podcast, or watch a television show, ads worm their way into our lives. The number of ads we're exposed to today is nearly double the number the average person saw in 2007, and more than five times as many as the average person was exposed to in the 1970s.

It matters because those ads shoot out images of what our lives "should" be. We're supposed to wear certain clothes, drive a particular car, and live in neighborhoods once reserved for TV families like the Cleavers and Bradys.

When we're insecure, sad, or angry, we make ourselves feel better by buying something we can easily live without, just to impress people who don't actually care.

So much of who we are as a society is tied up in image, which helps explain the number of people who heavily edit their social media photos. In short, we're interested in fitting into a world that's sold to us by advertisers, and that's an expensive habit.

2. It's dangerously easy to borrow money

Speaking of advertising, make it a point to count the number of ads you see for credit cards, loan companies, and banks in a single day. Those businesses make money when we borrow and they spend a chunk of it convincing us that we need to borrow more. Buying now and paying interest drains our bank accounts and makes us feel poor.

3. We're not using cash

We spend more when we're using credit cards than we do when we're shelling out cash. According to a study by the Sloan School of Management, we not only spend more, but we're more likely to make impulse purchases and give larger tips when we're paying with plastic. There are a few theories as to why this happens. Here are two of them:

1. Just thinking about using a credit card makes the reward region of the brain light up. In short, it's pleasurable.
2. We don't feel the pinch of spending when we use a credit card. In fact, until the bill arrives, we almost feel as though we got something for free.

4. We're exhausted

Whether we're rushing to get to work in the morning, trying to get the kids on the school bus, or taking the dogs for an early walk, most of us hit the ground running. By the time evening arrives we're too tired to do much of anything productive, and that includes paying bills and working on a monthly budget. If we're not saving enough money, we really don't want to think about it if we don't have to.

The problem is, we have to look an issue in the face to come up with a solution. That solution may be cutting unnecessary expenses or taking on a side hustle -- neither of which is necessarily attractive.

If you're facing a savings shortfall, it's okay to start small. Toss your loose change into a jar, use an app to save money on groceries, or automate your savings. If your debt load is standing in the way of saving, consider working with a non-profit debt counseling organization, such as the National Foundation for Credit Counseling. A professional can help you come up with healthy strategies to make your money work for you.