As fear of a double dip recession continues to hang over the heads of the American middle class, the middle class savings tumbled to an eight-month low, according to a report by First Command released on Wednesday.
The First Command Financial Behaviors Index reveals that consumers saved an average of $1,059 in short- and long-term savings in June, a decline from the year-to-date high of $1,469 in January. It was the lowest monthly savings rate since October 2009, when short- and long-term savings averaged $957.
Yet the good news is that Americans are still reducing debt. Consumers paid an average of $2,234 on short- and long-term debt in June, an increase of 10% from $2,033 in May. But the debt consumers paid off did not offset the reduction in monthly savings. Those with a positive savings-to-debt ratio – total savings compared to total debt –tumbled 39% in June, down five points from a record-high of 44% in the first quarter.
“The intensifying focus on debt reduction suggests that consumers are clearing
the decks of their financial lives in preparation for what could be a slower-than-expected economic recovery,” said Scott Spiker, CEO of First Command Financial Services, Inc., in a press release.
The report’s data predicts that consumers expect to increase the amount they funnel into savings and paying off debt.
“The good news is that consumers are becoming more creative in finding ways to save money,” Spiker said. “Cooking at home more often, cutting spending on junk food, vacationing closer to home – Americans are turning frugal living into a way of life.”
The First Command Financial Behaviors Index, compiled by Sentient Decision Science, LLC, is a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is plus or minus 3.1% with a 95% level of confidence.