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The State Of Savings, According To The Fed

We're saving less, but are reasons for saving may be surprising.There’s a bunch of interesting data in a new Federal Reserve survey, including the headline-grabbing drop in Americans’ net worth during the financial crisis.

The media have jumped all over the 38.8% drop in median net worth between 2007 and 2010, a number that isn’t terribly surprising given the amount of home equity that has vanished in recent years.

In looking at the latest Survey of Consumer Finances released Monday — a detailed examination of household finances conducted every three years — I was struck more by the statistics that answered a couple of big personal finance questions.

Why do we save?

The survey found that fewer families set aside money in 2010 — 52% — than at any time in the two decades the Fed has conducted the survey. Other studies have shown a similar lack of saving, both for emergencies and retirement.

For those of us that do save, there are a few primary reasons:

  • Emergency savings — 35.2%
  • Retirement — 30.1%
  • Education — 8.2%

Why is this surprising? There’s more of an emphasis on saving for emergencies than there once was, according to the Fed. And saving for education is a less-cited reason for saving than it once was, surprising given the higher costs associated with college.

These are also the primary reasons why my family saves. Are there other important reasons why you put money into a savings account?

What do we consider when choosing a checking account?

When the Bank Transfer Day phenomenon occurred last year, we heard from a lot of people who decided to ditch their big banks over fee foolishness.

But that’s not the main reason why people choose a particular bank or credit union for their checking account, the Fed says.

Some 46% of people who answered the survey said where the bank or credit union is located is a top reason why they chose to open a checking account there. Just 14.2% said they chose their institution because it had the lowest fees/minimum balance requirement.

Why is this surprising? I know location is hugely important, but with the rise of Internet banks, I thought bank geography would start to become less important.

It hasn’t when compared with previous Fed surveys.

Why do we borrow?

We owe more for education-related expenses. Again, this is unsurprising given the rise in college tuition.

But the Fed says education debt “exceeded the fraction of borrowing for vehicles for the first time” in the history of the survey.

Translated: More people owed money on their schools than on their cars.

Car payments represented 4.7% of family debt, while education hit 5.2%, up from 3.1% in 2001.

In fact, almost a fifth of all families had education debt in 2010, up four percentage points from the previous survey.

Why is this surprising? The burden of college costs — and the lack of home equity to pay for it — is jarring even if I knew this was a growing problem.

And remember, we’re talking about 2010 numbers here. So the situation might be even worse today.

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