Several years ago I was working as a grocery store clerk for $13 an hour. By budgeting and couponing I was able to put aside $80 out of each paycheck into savings. Within a year or two we had a tidy sum of a few thousand dollars in savings, which gave us a sense of security and pride. That security unraveled after unexpected dental surgery, a major car repair, and a trip to the emergency room wiped out our savings. Since then we’ve struggled to rebuild.
According to a recent report from the Corporation for Enterprise Development residents of only four states were worse at saving money than North Carolinian’s. Fewer than half of us are putting away money for the future in the form of emergency funds, savings accounts, or investments.
I can’t say I’m surprised. My middle-income, two-earner family manages to pay the bills each month, but planning for the future seems like something richer people do. And when I checked in with my friends, many of them agreed. “I basically rely on my income for all my expenses,” said my friend Ali*, who is single and in her early 30s. She said she doesn’t have much savings, and a huge unforeseen expense like a medical emergency would leave her using credit or seeking help from her parents.
Experts say Ali isn’t unusual. According to the U.S. Department of Labor, women are not putting aside savings at a rate that could sustain them through a small emergency, let alone retirement. Although they make up 46% of the workforce, women are much more likely to hold part-time or low-wage jobs. And with the wage gap, the 23 cents less women make on every dollar that a man earns means far less money to put away for a rainy day.
More than 30% of middle-income families—those who earn $79,000 a year or less– have less than three months of savings. North Carolina’s poorest—those with less than $23,000 in annual income for a family of four—barely manage to save at all. The CED’s report says that 9% don’t have a bank account and another 21% use sub-optimal banking methods like check cashing services and money orders.
This means the unexpected expenses that killed my family’s meager savings could have completely dismantled the finances of a good number of my neighbors. The average amount of credit card debt for a North Carolinian is more than $10,000, and with 2/3 of bankruptcies caused by medical debt, it stands to reason that a lot of those credit cards are bearing the weight of medical charges.
There are groups working to help women bolster their savings, but many say they have a long way to go. The CED says one of the biggest factors that determines whether a woman is successful at savings is whether she has been taught how to bank and save. The first source for that information is parents, and of the friends who answered my nosy questions about their finances, the ones who were successful were also those whose parents prioritized financial education.
“I don’t recall any discussion about savings over the long haul. In fact, I definitely recall my mother complaining about her sister (my aunt) being too much of a penny pincher,” said Kristy, who, despite a comfortable salary struggles to maintain an emergency savings account. She has been able to put aside money for her kids’ educations and retirement, but says when she balances dining out against tucking away funds for unforeseen expenses, she chooses the convenience of a restaurant every time.
One of the few people I know who has the suggested three months’ salary socked away, Erin, said she learned good financial management habits at home. “Both [my husband] and I were taught by our parents that money should be spent wisely, saved whenever possible, and donated to organizations that support the less fortunate,” Erin said.
Both Erin and Kristy come from middle-income families. Those who grew up in poverty—especially those who weren’t given a chance to learn about saving money—do not have high chances of financial stability and saving. For many women, things like losing working time due to having a baby or raising a child, or coping with the fallout of domestic violence, can undermine any attempts at investment in the future.
The National Coalition Against Domestic Violence works to educate women about money and savings by teaching budgeting and other financial literacy topics. They say victims of domestic violence often have to rebuild from nothing, as their spouses have denied them funds or the ability to work outside the home. They publish a free workbook, Hope & Power, that helps guide women to financial independence.
Most experts agree the first step to saving is to start small. In the last few months I have set up an automatic transfer in my bank account that moves $80 from checking to savings twice a month. Right now I have $600 or so in there, but it really came in handy a few weeks ago when I misjudged my budget and over-drafted my checking account.
Instead of paying $70-plus dollars in penalties, the savings cushion meant I was only responsible for a 50-cent charge for the bank moving money to cover the expense. It’s these types of small steps that help move women from a seemingly inescapable financial hole to the ability to look forward.
Do you have three months’ savings stashed away for emergencies? How did you do it? How do you talk to your kids or friends about setting financial goals? Let us know by sharing your strategies in our comments section.
*The women in this story asked that we use their first names only for privacy when speaking about financial matters.