New research shows just how much you save when prices drop.
Cheap gasoline can really fuel your finances. That’s the conclusion of a new study by JP Morgan Chase, which found cheap gas benefits middle-income families the most.
Depending where your family lives, “middle income” can mean as little as $42,000 or as much as $126,000 a year for three people. JP Morgan Chase says these families spent $477 less on gas in 2015 than they did in 2014 – “equivalent to half of the average month’s rent or mortgage payment.”
So those pennies at the pump really add up. For low-income families, the savings are even more dramatic…
Households earning less than $30,000 annually benefited the most—their saving from lower gas prices of $332 was the equivalent of a 1.4 percent boost to discretionary income.
What is America doing with this cash windfall? Not what Consolidated Credit president Gary Herman suggests: “Paying down debt is a way to stretch your dollar – because if you have credit card balances, you’re paying interest each month. Every dollar you save, you can tack on another 15 percent, which is the average APR right now.”
Instead, JP Morgan Chase says we’re spending that money on restaurants (19 percent of the savings) and “retail” (16 percent). Interestingly, “They spent roughly 24 percent of their savings from lower gas prices at gas stations.” What does that mean? Either they spent it on more gas to drive farther, or they spent it on items like food or drinks that the gas station sells.
Herman urges Americans to save this brief windfall.
“Gas prices will surely go up again, so this is one of those rare times when you can adhere to a family budget and come out ahead by simply not changing your spending behavior,” he says. “In other words, if you do nothing, you’ll have more money than the month before. So this is one of those rare times I urge Americans to do nothing and save!”