Perceived Financial Preparedness, Saving Habits, and Financial Security

Abstract

This brief uses data from the CFPB’s Making Ends Meet survey to explore consumers’ savings-related behaviors, experiences, and outcomes. We highlight the relationship between how much money people think they need in savings for emergencies and how much money they report actually having in their checking and savings accounts combined. Together, these two elements provide insight into consumers’ perceived financial preparedness. For many people, we observe a gap between what they think they need and what they have.

We also explore the relationship between saving and more objective measures of respondents’ financial situations, such as past experiences with financial shocks and difficulty paying bills—that is, making ends meet. We find that consumers who report their household’s monthly saving habit as “don’t save” (versus “save”) are more likely to report having difficulty paying bills in the past year, and this gap exists at all levels of income. We also find that when negative circumstances are compounded, consumers experience greater financial strain. Specifically, when consumers have less than they think they need for emergencies and they do not have a habit of saving, their financial well-being is particularly low and they are even more likely to report that finances control their lives. Similarly, consumers who experience a financial shock and do not have a habit of saving are more likely to have difficulty paying bills and other expenses. This research brief enhances the evidence base of the CFPB’s Start Small, Save Up initiative, which aims to promote the importance of building a basic savings cushion and saving habits among U.S. consumers as a pathway to increased financial well-being and financial security.