Studies show that a substantial portion of Americans of all ages are living, earning and spending without bank accounts. But how does this trend play out specifically among older Americans? And how does the lack of traditional financial services affect their retirement savings?
Let’s take a look at some of the statistics to find out.
Many Older Americans Are Unbanked
According to a study from the AARP (American Association of Retired Persons) 5.4 million people age 45 and older live in unbanked households. Being unbanked is particularly common among lower income Americans; more than half of the older unbanked population had incomes under $25,000 per year.
Why Are Older Americans Foregoing Bank Accounts?
The AARP study found that older Americans were most likely to go without bank accounts due to a perception that they are costly services reserved for wealthier people. For example, many believe that they “don’t have enough money to make an account useful,” or that “a checking account is too expensive.”
Beyond financial reasons, others said they avoid bank accounts because of privacy concerns, or that they lack the personal documents required to open an account.
Why Are Bank Accounts Important for Older Americans?
For adults in the 45-64 age range, retirement savings are of particular concern. Whether they started saving at a young age or have little to nothing in their retirement fund, this is an important time to maintain steady contributions. The problem is, according to a separate study of low-income Los Angeles households, those without a bank account are significantly less likely to save a portion of their paycheck than those with an account.
This emphasizes the point that, in order to attain financial goals during this critical savings period, it’s important to have access to financial tools including a savings account.
Even if you’re getting a later start, it’s important to think about retirement savings. Here are a few strategies to consider for growing your retirement fund no matter what your age.
- Reinforce your budget. If you have trouble controlling your spending at the grocery store, eating out or for other expenses, consider using a prepaid debit card system so that you can set and stick to predetermined spending limits. However, be sure to carefully select an option that will not eat away your funds with fees. In addition, there are now several online platforms that help users monitor and manage all expenses, such as Mint.com and SmartCredit.com.
- Cut down on extravagant spending. If your retirement fund is smaller than you’d like it to be, it’s a good idea to scale back on any expenses that you can live without, including travel and entertainment. Take the money you would have spent there and apply it directly to your retirement savings.
- Pick up a few side gigs. There are many ways to make side money without taking on a full-fledged second job. For ideas, check out 25 Ways To Earn Extra Cash.
Regardless of age, however, it is never too late to open a bank account. In fact, many institutions have programs that cater to individuals who are currently unbanked.