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The Savings Dilemma: A Study of Consumer Savings Behavior

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Americans are notoriously bad at saving money.

Whether it’s putting aside money in a bank account or pumping a percentage of their paycheck into a 401k, Americans save just 6% of their disposable personal income — down from 11% in 1979.1

The government and corporate America have started sounding alarms about this troubling trend.

The Federal Reserve highlighted the issue in a 2017 study that found 40% of Americans surveyed said they didn’t have $400 readily available to pay for an emergency expense.2 Citing that figure, the Consumer Financial Protection Bureau recently announced an initiative called “Start Small, Save Up” that aims to promote the importance of savings.3

Meanwhile, a growing number of companies, from Levi Strauss & Co. to Kroger Co., participate in programs that help their employees save.4

Savings aren’t only important to individuals, but also the economy and, disproportionately, to banks. Novantas estimates that roughly a third of a bank’s market value depends on the robustness and health of the bank savings balances.

Yet for all of its importance, savings behavior — and the needs and attitudes that drive it — has often been ignored by banks.

Recognizing this shortfall, Novantas and the Consumer Bankers Association conducted research earlier this year to understand U.S. consumer attitudes toward savings and their behavior associated with it.

The research surveyed more than 3,000 people who make financial decisions for their households and have at least $2,000 in savings balances.

The results found that consumers split their savings into three buckets: “today,” “tomorrow” and “someday.” Nearly two-thirds of them are thinking about opening a new savings account, with a better rate being a big factor in that decision. And half of those surveyed said they would be comfortable with an online-only provider.

Furthermore, while many banks consider retail customers to be either price-elastic or inelastic, the research found that customers have different elasticity behavior for different portions of their savings.

This research will be illuminating to banks that face the conundrum of how to grow deposits in a cost-efficient manner that also creates customer stickiness. Competition for deposits from non-bank providers will keep the near-term pressure on banks regardless of Fed rate policy.

Understanding consumer savings behavior will be an important step in winning the battle for valuable deposits.

There is an enormous amount of shareholder value tied up in retail deposits, which make up 60% of the deposit landscape. Most of the value comes from non-price sensitive deposits such as back-book savings and checking.

But 23% of the total $1.3 trillion of shareholder value is at risk because banks are competing in a price-based “race to the bottom.” That means there is more than $500 billion at risk.

Given these trends, the research identifies savings objectives and the different types of savers.

The research sought to understand the rhythm of consumer savings and how people shop for new savings products. It also explored the level of comfort that consumers have with online-only banks compared with traditional institutions.



1 U.S. Bureau of Economic Analysis, Personal Income and Its Disposition, 1959-2019
2 U.S. Federal Reserve, Report on the Economic Well-Being of U.S. Households, May 2018
3 Press release: “CFPB Starts Small, Save Up Initiative,” Feb. 25, 2019
4 Wall Street Journal, “Employers Help Workers Build Household-Emergency Funds,” June 13, 2019

For more information, contact Novantas Marketing

+1 (212) 953-4444

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