We all know that Americans as a whole don’t save a lot of money. The latest savings statistics for 2014 shows that the average American only saves ~4% of their income a year. 4%! In other words, it takes the average American 25 years to save just one year’s worth of living expenses. That is a disaster.
When you’re 60-something years old and only have 1.6 years worth of living expenses to buttress your declining Social Security checks, life isn’t going to be very leisurely. You’ll probably be mad at the government for lying to you and mad at yourself for not saving more when you still had a chance.
The problem with averages is that averages distort reality. For example, the average household has a net worth of approximately $710,000. You and I know that this is impossible based on common sense. But simple math doesn’t lie. Take the total household wealth in the US of $81.8 trillion (according to the Fed) and divide by 115,226,802 US households (according to the Census Bureau) and you get $710,000. (Related: How Much Should My Net Worth Be By Income?)
I’m absolutely positive more than 90% of Financial Samurai readers save more than 4%. We are personal finance enthusiasts after all. Therefore, what’s the reality behind this ~4% national savings figure? The truth is that savings rates vary by income.