Savings: A Little Can Make a Big Difference
About This Study
This research was funded by the FINRA Investor Education Foundation. All results, interpretations, and conclusions expressed are those of the research team alone, and do not necessarily represent the views of the FINRA Investor Education Foundation or any of its affiliated companies.
Key Findings
What Can Savings Do for You?
Play with the variables in this tool to see how small amounts of savings correlate with housing stability, utilities maintenance, use of high-cost borrowing, and overall financial satisfaction.
| What is your gender?
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Are you over the age of thirty-five?
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| Are you married?
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Do you have dependents?
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| What is your annual household income?
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Do you have a college degree?
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| FINANCIAL STRESS | |||
| If your savings is > $250 | If your savings is ≤ $250 | People who have over $250 in savings are... | |
| Likelihood of having to move out of your home for financial reasons | TBD | TBD | TBD |
| If your savings is > $100 | If your savings is ≤ $100 | People who have over $100 in savings are... | |
| Likelihood of having your utilities shut off | TBD | TBD | TBD |
| If your savings is > $100 | If your savings is ≤ $100 | People who have over $100 in savings are... | |
| Likelihood of using high-cost borrowing | TBD | TBD | TBD |
| FINANCIAL SATISFACTION | |||
| If your savings is > $100 | If your savings is ≤ $100 | People who have over $100 in savings are... | |
| Likelihood of being financially satisfied | TBD | TBD | TBD |
Study Data
SaverLife emailed or texted 28,832 members and asked them to complete an online survey with 39 questions about their financial capabilities and situations, their demographics, housing, healthcare, and other variables. 1,149 completed survey responses were collected between February and May 2020. While we looked at differences in responses from before and after COVID-19 shelter-in-place regulations were enacted, few differences in the data were identified. Participants were compensated $5 to $15 for participating in this study. IRB approval was obtained from Sterling IRB.
Administrative and demographic data
About Average Daily Savings Balances
Using savings account transactions for 727 SaverLife study participants for whom we could see transactional data prior to January 1, 2020, we calculated the average daily savings balance for the three months leading up to March 15, 2020, a period that largely preceded the major economic disruptions caused by the pandemic. Because this analysis is focused on the effects of having relatively small savings on financial outcomes, we dropped 40 participants who had a three-month average daily savings of more than $10,000, resulting in a sample size of 687 respondents.
A three-month average daily savings of $10,000 is nearly eight times the interquartile range, which is well above the conventional recommendation of 1.5 or 2.0 for outlier consideration. We did not use Z scores for outlier detection because the three-month average daily balance variable is not normally distributed and highly skewed to the right. We used this group of 687 observations throughout the study to find associations between savings balances and consumer outcomes, though sample sizes did vary across analyses due to independent variables that were missing data.
Importantly, our ability to calculate an average savings balance over three months for a study participant might over- or understate the person’s actual savings on any given day. For example, someone who maintains a three-month average daily savings balance of $100 could have maintained a $300 balance for 30 days, and a $0 balance for 61 days. Similarly, the person might have maintained a $600 balance for 15 days, and a $0 balance for 76 days. Last, the number and type of account that the three-month average daily savings balance is based on varies. Account types include traditional savings and checking accounts, as well as money transfer accounts like PayPal and Venmo, and investment accounts. As a result, negative balances are possible.
Sample Demographics
About Statistics that Control for Demographic Variables
Statistics in the study that controlled for household income, gender, age, education, presence of dependents in the household, and marital status are based on the results of linear probability regressions that regressed the control variables on a binary dependent variable. For these regressions, the independent variable of interest—that is, three-month average daily savings balance—was dichotomized.
For the regression that examined moving for financial reasons, 1 = > $250 three-month average daily savings balance and 0 = $250 or less three-month average daily savings balance. For the other three regressions, 1 = > $100 three-month average daily savings balance and 0 = $100 or less three-month average daily savings balance. The percentages reported in the research brief are the coefficient estimates for the binary three-month average daily savings variables (that is, the difference between having the indicated savings amount and not having it) divided by the mean of the dependent variable.
The savings balance variable for the regression with “moving for financial reasons” as the dependent variable was marginally significant at a p-value of .068. However, due to a relatively high level of missing data with the age variable, excluding the age from the regression decreases the sample size for the regression by 76 observations and results in a larger coefficient for the savings variable and a p-value of .024. The savings balance variables for the regressions that examined the other three independent variables (having utilities shutoff off for financial reasons, using high-cost methods of borrowing, and financial satisfaction) were all statistically significant at an alpha level of .01.
Again, excluding age from these regressions results in larger coefficients and smaller p-values. As such, the coefficients for savings on the various outcomes reported in this brief are likely conservative. Robust standard errors were used for significance testing. Regression output is available upon request.
About SaverLife
Founded in 2001, SaverLife (formerly EARN) believes that bringing meaningful change to America’s saving habits is not only possible but necessary. Forty percent of Americans have less than $400 in savings, and a single unexpected expense could profoundly disrupt their lives. The problem only compounds for the millions of people living paycheck to paycheck.
As a purpose-driven nonprofit, SaverLife is uniquely positioned to lead a systemic change. Through our engaging SaverLife platform, we provide prizes, rewards, expert resources, gameplay, and support proven to incentivize saving and spur new behavior. Through our integrated network of employers, financial institutions, nonprofits, and advocacy groups we advance aspirational savings programs, analytic insights, and policy initiatives dedicated to a more equitable America.
About FINRA and the FINRA Foundation
The Financial Industry Regulatory Authority (FINRA) is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the Securities and Exchange Commission, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.
The FINRA Investor Education Foundation supports innovative research and educational projects that give underserved Americans the knowledge, skills, and tools to make sound financial decisions throughout life. For more information about FINRA Foundation initiatives, visit www.finrafoundation.org.