Page 19 - A Guide To Financial Health v2

Chapter 02: Starved for savings

“An income or expense shock can, and does, push consumers like this into

the red when they have to dip into their minimal short-term savings to meet

an immediate need.”

– THE ASPEN INSTITUTE

If people can’t save money, they can’t build long-

term financial stability

Multiple research bodies such as The Aspen Institute and the Financial Health

Network have identified having reliable short-term savings as the most

important precursor to long-term financial stability.

But unreliable short-term savings undercuts long-term progress. One stark

example of this is the 27% of employees who have withdrawn retirement

funds to pay for unforeseen expenses or medical bills—plus the 49% who

haven’t yet, but anticipate needing to in the future. Workers are so strapped

that 18% of workers have cut back on their 401(k) contributions in the past

year, while 38% don’ t participate in plans at all.

“On average, households say most of their accounts will be spent down in the

shortest time horizons: 73% of accounts are used for funds to be spent

within six months and 84% of accounts are for funds to be spent in less than

a year.”

– U.S. FINANCIAL DIARIES