Charlie Bilello:

What matters more – your personal savings rate or your investing rate of return?

Your instinct is probably to say the latter, as that is what gets far more attention. We are often thinking about how we can make a higher return; we rarely think about saving more.

In reality, though, saving is far more important for the majority of Americans.

The 5.5% is an aggregate number. Most Americans fall far short. Some startling figures:

  • 62% of Americans have less than $1,000 in a savings account. Even at higher income levels of between $100,000 and $149,999, 44% had less than $1,000. See here.
  • 66 million Americans have zero dollars saved in an emergency fund. 47% of Americans could not afford an emergency expense of $400. See here
  • 43% of working-age families have no retirement savings at all. The median working-age couple has saved only $5,000 for retirement. 70% of couples have less than $50,000 saved. See here.
  • 65% of credit card users carry a balance (don’t pay off their bill every month), paying an average interest rate of over 15%. The average credit card debt for households that carry a balance is $16,048. See here and here.

He includes this chart which encapsulates it well:


Do the opposite of what most people are doing.