After years of YOLO trips, TikTok Shop cart buying, and Sephora hauls, Americans are officially over it. And it’s about damn time (talking to myself!).
Years of impulse buying and “treating ourselves,” has caused many of us to pump our brakes on unnecessary purchases, and if that’s not a recession indicator, I don’t know what is. The personal savings rate jumped to 4.5% in May, a big shift from where we were just a few months ago, and dare I say it — a sign of the times?
New survey data from Vanguard shows just how serious this shift really is. They’re calling it the “revenge saving” era, and it makes so much sense. People seem fed up with economic uncertainty and rising prices eating into their budgets. So they’re fighting back in the best way they know how: hoarding cash instead of spending it (well, all of it, because we still need a little treat every now and then), because talks of a recession have been looming for months, and umm… a war may be brewing?
Don’t let Instagram fool you. The changes are pretty dramatic when you look at summer plans. Though you may have seen a lot of influencers and your favorite celebrities in Europe over the past couple of weeks, they’re not the majority. A lot of Americans actually aren’t making any big spending plans this summer but instead, they’re focused on emergency savings instead. Others want to keep their money flexible rather than committing to expensive vacations or major purchases. It’s a complete flip from the “you only live once” mentality that dominated spending habits in recent years, specifically in the thick of the pandemic when people were focused on little luxuries like home and personal improvements.
In my opinion, wanting to save and actually knowing how to do it are two totally different problems however. The data shows that most people want to change their saving habits, but they’re stuck on how. Some think they don’t have enough money to start, while others literally don’t know where to begin. It’s a lose lose battle, particularly because this isn’t the stuff we’re taught in schools.
“It’s hard to make a change, but it’s important to start somewhere,” said Kate Byrne, Head of Vanguard Cash Plus Distribution. “There is no minimum amount needed to begin saving, so you should make sure that for every dollar saved, you are earning the returns you deserve by leveraging a high-yielding savings vehicle.”
The saving thing gets even more frustrating when you look at where people are actually putting their money. Nearly half are using regular savings accounts, and plenty of others are just keeping cash in checking accounts. Both options basically guarantee you’re losing money to inflation because the interest rates are terrible.
It’s like people figured out they need to save more, but nobody told them how to make that money actually work for them. For myself, I didn’t learn until my late 20s on how to actually invest and what the options were. The motivation is there, but the execution needs some serious help.
“There is a clear desire to save, but plans don’t always translate to action since many consider creating a savings strategy to be daunting,” said Matt Benchener, Managing Director of Vanguard’s Personal Investor business. “Saving is essential to overall financial well-being, so it’s crucial to tackle the actual and perceived barriers to saving. One way to do this is to save with intention by leveraging a high-yielding savings vehicle, like Vanguard’s Cash Plus Account, which allows Americans to earn more than eight times the average interest of a traditional bank savings account.”
This whole revenge saving movement feels like people finally waking up to reality. After getting burned by inflation and economic chaos, Americans are choosing boring stability over exciting purchases. Maybe that’s exactly what we need right now.
Though your summer might look a little different this year, your bank account will probably [definitely] thank you later. Trust me!