Why You Don’t Save Money & How To Start

What percentage of your monthly income do you save? 65 percent of Americans (or 2 out of every 3) either don’t save money at all or save very little.

Rather incomprehensible, isn’t it? Let us break this number down further.

graph showing percentage of annual income Americans save

  • Out of this 65 percent
    • 19 percent (or 1 out of every 5) Americans aren’t saving any money.
    • Another 46 percent save less than 10% of their monthly earnings, which is far from sufficient.
  • Only 16 percent save more than 15 percent of what they make.

And women lag even further behind than men in their savings.

According to the OECD, Americans save only 6.7% of their household income. This is way lower than Switzerland where households save 17.8 percent of what they make.

These numbers are quite an eye opener, aren’t they? And concerning too.

Why Should You Save Money?

I am not asking a rhetorical question.

In order to understand why this data is disturbing, you need to look at why we should be saving money. I am sure you are already aware of these reasons. However, even at the cost of repetition, let us list them down here.

To Fund Retirement

Your savings will fund your retirement. They will help you maintain your lifestyle once you no longer work. A survey from GoBankingRates found that 40 percent of Americans will retire with less than $10000 to fund their retirement.

pie chart why Americans will retire broke

Girl, you may be earning now, but don’t you want to retire some day? And hopefully, you want to retire soon. Think about how you will fund your day-to-day life after that?

Deal With Unexpected Financial Curve balls

Even before you retire, there could be events in your life for which you need to have a stash of money put aside. It could be anything from a broken bone to a lay-off. These events can be stressful and costly. Your savings will help you get over a financial emergency that life throws your way. It is your savings which will help you avoid having unpaid medical bills, overdrawing on your checking account or being late on your mortgage payment.

Realizing Financial Goals

Then again you need to save for a goal – a house, a wedding, a dream vacation or your child’s college education. Drawing on your credit card, overdrawing from your checking account are possible ways you can fund your goal. These may be convenient but have consequences. Credit card loans charge as high as 20% interest rate or more. Carrying a credit card balance hits your credit score which hampers your ability to borrow for other reasons. Your mortgage rates could end up being higher.

Reasons Why People Don’t Save Money

Here are some of the commonly cited reasons why people are unable to save money.

Don’t have enough money left after bills and expenses.

Take a moment to think of what you do when you get a bonus, a tax refund or if your parents gift you money. Do you go out to splurge? Are you able to resist temptation or do you want to buy products being advertised, clothes your neighbors and friends wear, or things that you see in display windows?

If so, then you are likely to be an impulsive shopper spending money on things you want and not just what you need. This is how people get into the habit of living from paycheck to paycheck and not having enough money left over to save.

Too much debt to put into savings.

An average American household has close to $17,000 of credit card debt alone which can cost them as much as 20 percent per annum. Add to this amount their auto loans, student debt, and mortgages, the amount of debt being carried by an American household is $137,063. Compare this with the average household income across the country of $59,039. It is of little wonder there is no money left over to save.
graph showing debt carried by an american household

Interest rates are too low.

So people are not motivated to save.

Generally speaking interest rates have risen from their lows of 2014. They are nowhere near the highs of a few years ago. However, if you do not save right now you may end up having to borrow when rates are actually very high.

Saving consistently actually helps you form good habits. It is just like muscle memory – if you get into the habit now of spending less than you earn, you are going to find it easier to do so when interest rates are higher and you want to save. Also, you are not likely to play catch up if and when interest rates do rise. You will already have a balance that will fetch you those higher rates.

You will save more when your income rises.

Or, you simply procrastinate.

Saving is a habit. If you don’t save today, it is very likely that you won’t start doing it tomorrow. Even if your income does rise in the future, your expenses are likely to rise as well. You might see the increased paycheck as an opportunity to upgrade your lifestyle – buy the new phone you have been wanting too or a bag from the label that your friends already own. Breaking old habits requires intention and some effort.

Emergencies don’t happen to you.

You think you are immune to having an emergency.

As children, we don’t have to worry about emergencies and how to deal with them. That is what parents and other adults in our life are for. The problem arises when we become adults and our mindset does not change.

If this is you, wake up. Yes, YOU.

Emergencies can occur to anybody at any time. It could be a medical emergency or a job loss which could result in you ending up in financial hot waters.

Lack of knowledge of how or where to save

You actually spend less than what you earn. However, the money just sits in your checking account earning you nothing. You don’t know what to do with it. Maybe the different savings options confuse you and it is difficult to decide which is the right one for you.

Understanding Behavioral Reasons Why Some People Don’t Save

The above mentioned are the reasons that people say why they don’t save money. It is also interesting to understand the psychological and sociological reasons that prompts the behavior of people when it comes to saving.

On her blog, Lily wrote an interesting and thought-provoking article examining the behavioral reasons why some people just don’t save. Much of this next section of my article is based off what she says in her article, which I agree with.

Delayed Gratification

What is saving? It is nothing but reducing your consumption today in the hope of a better life tomorrow. You are delaying your gratification by saving. Obviously, you need to be rewarded for it.

There is a very interesting experiment done in the late 1960s at Stanford which involved little munchkins and marshmallows. It was deceptively simple.

In the experiment, each child (4-5 years old) is taken into a private room and a marshmallow is placed before them. At this point, the researcher offers a deal.

The kid is told that the researcher is going to leave the room and come back shortly with another marshmallow. If the child did not eat the first marshmallow then he would be rewarded with the second. If, however, the child he cannot wait and does gobble his treat before the researcher returns then he would forfeit the second one.

The choice for these cute tots was simple: to have one treat instantly or two treats later when the researcher returned.

It is very interesting to watch how these kids behaved. Some ate their marshmallow immediately, while other squirmed in their seats before succumbing to the temptation of their soft, gooey treat, and, finally others who could last the entire 15 minutes and double their reward.

What was most interesting was that the study tracked these kids for the next 40 years and found that the children who were willing to delay gratification ended up having higher SAT scores, lower substance abuse, better responses to stress, and generally made better choices in life.

So success usually comes down to choosing the pain of discipline over the ease of instant gratification. The ability to save is just that.

Learned Helplessness

Learned helplessness is a phenomenon that occurs when people have become conditioned to expect pain, suffering or discomfort. These humans (or animals) become so conditioned that they stop trying to avoid the pain at all because they believe they have no control over the situation. They act as if they are helpless, even if they actually aren’t.

When the situation is bad it is easier to give up hope than to fight it. These people do not believe they have any control over their situation. They are convinced they can do nothing to that will improve their circumstances. So they don’t even try.

This explains why people battling significant debt often give up trying to improve their situation. They find it easier to give up than to try.

This is also the reason that people proffer reasons excuses such as ‘this is just who I am’ and resign helplessly to the choices they make about spending and not saving enough.

If you ever find yourself making such statements, do take some time to think if you are actually as helpless as you believe. Is there some way you can make a change or have someone help you out in making these small changes?

Money Habits Formed.

Money values are acquired during adolescence and are based on those of the people they see and interact with most – parents and peers.

Parental influence plays a huge role in what children learn and the habits they form and set. Children tend to emulate their parents. It is what they know.
If parents are frugal kids are likely to be the same. On the other hand, if parents are eating out often, their kids will grow up used to that way of life and would not know how to live otherwise.

Changing habits first involves unlearning what you already know. It takes time, commitment and effort.

Optimism versus Hope.

The Hope Theory by Charles R. Snyder states that people with hope have both the will and the pathways and strategies necessary to achieve their goals. In other words, a person with hope has the determination to achieve his goals and the ways to get there.

The Hope Theory helps us to understand why some people who want to reduce their mountain of debt will find ways to reduce their expenditure or earn more.

Hope is different from optimism.

Optimism involves an expectancy of a positive future without regard to any personal control over the outcome. People don’t save today because they are optimistic about their ability to save tomorrow.

Sheer optimism causes people to believe that they are far removed from any financial emergencies and hence don’t need to save for it.

How To Start Saving

If you are saddled with debt to a point that it makes it impossible for you to save, you need to start tackling your debt. Start with your highest cost debt first. Most likely it is going to be your credit card.

Try transferring your balances to the card which has the lowest rate of interest in order to lower the rate you are currently paying. See if it is possible for you to take a personal loan at an even lower rate to refinance your card debt. This will be possible if your credit is decent. These methods only reduce your cost of the debt. You have to pay off the loan still.

For all other debts, in order to repay them faster, you need to either reduce your expenses to free up cash. Else you and your partner should consider taking up a side hustle to bring in more money.

If your mortgage is the one which eats up all your cash you should evaluate if the house you have bought is too big. All your housing costs (mortgage, rent, insurance and property taxes) should not exceed more than 30 percent of your household income. If they do, then you should evaluate downsizing to a home that you can actually afford.

While paying down debt is the correct thing to do, you should first consider building up a small fund that you can use in case of an emergency. To understand more about how to prioritize between repaying debt and building up savings, read this article next.

monthly budgeting exercise can help you become intentional about your spending. I have personally observed this. Growing up in a home where my parents emphasized savings, frugality was ingrained in my DNA. Even then a simple expenditure tracker was useful. I was able to find expenses that I had forgotten I was incurring. Like my monthly subscription to a music streaming service, I did not even remember I had, let alone listen too.

If it is a lack of knowledge that prevents you from saving, then you should start with the basic. Open a savings account with a bank you trust and transfer your money there. Your money will earn you more than what it currently does in a checking account. Then find out more about the other savings options for retirement like a 401(K) plan or a Roth IRA account.

As for habits, all I will say is changing those is in your hands. Your determination and conviction of its benefits will make the journey to better financial habits easier for you.

Are there any other reasons why people are unable to save money? I would love to hear from you.

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flowers on a bed with text reasons why people dont save money and how to overcome them

Photos by
Burst from Pexels


  1. Deborah

    November 28, 2018 at 7:30 pm

    Hi – informative post. I am in Australia and I am sure we have many similar conditions to the USA. For a short while I had to go on employment although my husband was on sickness. The unemployment benefit amount has not changed for over 20 years. It is about 30% under the poverty line is what they estimate. I came from a large family and was money educated in this way (I think I would have eaten the marshmellow though lol!) to deal with money wisely. Hence even with the low income – I put away less than 1% or $3.20 of the unemployment benefit. I have been brought up to take care of money and think of it as a privilege thankfully. But I see so many who do not and I think that hard times will come – sooner than later. Education and motivation is a big thing in the scheme of things and more of it is needed. Particularly to “inspire” people to do things differently to what they have done. Thanks for your post 🙂

    1. pennies4cents

      November 29, 2018 at 9:53 am

      Hi Deborah,

      Thank you for sharing your story. You go girl.

      You make some very valid points – about how you were trained to think about money and savings. It is about putting away something so that when you do have some money come by your way, you are either not tempted to spend, or if do have the occasional one – it is easier to resist it.

      Ultimately it is the marshmallows that add up.


  2. Kim

    November 28, 2018 at 8:48 pm

    Sound advice for everyone…even people that are already saving!

  3. Swati@hearmefolks

    November 28, 2018 at 9:35 pm

    I can’t agree more with this list Bhavna! The art of frugality is ingrained in most of our DNA too. But, still a proper plan is lacking. As you suggested, having an expenditure tracker setup might help monitor the expenses and cut them down where ever possible. I heard great things about Trim app. What’s your take on this?

  4. amira

    November 28, 2018 at 11:23 pm

    These are awesome tips on how to start saving. One of the big reasons I save is to fund my retirement because I don’t want to work this hard when I’m old and gray 😛 Hopefully, by that time, I’ve enough saved up to live a good quality life without the stress of earning money. Great practical tips here!

    Thanks for sharing,
    Amira at ASelfGuru.com

    1. pennies4cents

      November 29, 2018 at 9:58 am

      Yes! Retire and then do all the things you want to.

      I hear stories of so many people not being able to retire because they have not saved. It is a sad reality.

  5. Suzy

    November 29, 2018 at 11:18 am

    You raise so many good points here. I especially connected with the part about delayed gratification and conditioning. It can be very hard to break those cycles. I decided to drastically change my habits a few months back and have cut $2000 off my credit card already – hooray! It all come down to making the choice about what I want and what I need, and recognising the two. This was such a great read to keep me on track and motivate me further

  6. Sasha

    November 30, 2018 at 12:37 am

    This is a great post and a realistic viewpoint on debt and savings. Thank you for all the great insight! I’m going to check out some of the links to learn more.

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