More than a third of American adults are tapping into their savings accounts to help them pay higher prices, according to new research.
In the face of high inflation, 36% of people say they withdrew an average of $617 from their savings in the first six months of this year, according to New York Life’s latest Wealth Watch survey. Over the same period, the US personal savings rate fell to 5.1% in June from 8.7% in December 2021, according to the most recent measurement of the Federal Reserve Bank of St. Louis.
By age group, Generation X (those born between 1965 and 1980) got the most savings for daily expenses: an average of $644, according to the survey.
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High inflation continued to weigh on consumer budgets, although it may ease somewhat. The July measure – released on Wednesday – shows prices are up 8.5% from a year ago, but not as high as the 9.1% year-on-year increase recorded in June.
Income, however, is not keeping up: the latest reading of hourly wages showed an increase of 5.2% in July compared to a year earlier, which means that inflation generally wiped out the increase in income.
‘Find out what your expenses are’
If you’re one of those who turn to saving to meet their daily needs, experts say it might be time to take a closer look at your income and expenses.
The ideal solution is to increase your income, said certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York. “Optimizing turnover – how much you earn – can really help,” he said.
If that’s not a viable option, then you really need to look at your spending, Boneparth said.
“Find out what your expenses are,” Boneparth said.
“A lot of people probably haven’t done this exercise,” he said. “Really go back and look at three or six months of your spending and figure out what needs to stay and what needs to go.”
While turning to savings to meet living expenses isn’t ideal, it’s better than going into debt to do so, Boneparth said.
Nevertheless, many consumers accumulate credit card debt. The sales reached a 890 billion collective dollars in the second quarter, a jump of 13% compared to the previous year and the largest annual increase in more than 20 years, according to the Federal Reserve Bank of New York.