More households admit to having no savings

Many individuals struggle with two wealth-building initiatives over the course of their lives: eliminating debt and building savings. However, a recent study reveals the latter is becoming more difficult for some households, many of which are strapped by credit card debt or facing unemployment.

According to a study conducted by the Institute for Social Research at the University of Michigan, the number of families who admitted to having no liquid assets, including savings, checking accounts, bonds, money market funds, U.S. Treasury bills and certificates of deposit increased from 19 percent in 2009 to 23 percent in 2011. However, the number of households who reported having at least $50,000 in liquid assets or more increased from 11.8 to 14.6 percent during the same period.

The results suggest that those who rode out the recession with a solid savings base have maintained their position, according to study co-author and Institute economist Frank Stafford.

"People who were precarious are in even worse shape, while people who are in good shape see the turmoil and decide to save more," he said.

One of the most common issues individuals have when it comes to building a healthy savings fund is trying to balance their debt payments with their desire to save. Many may consider paying off high interest credit card debt or making additional student loan payments to be a priority, which will free up more income for savings. Others, in contrast, often make the minimum payments to their credit and loan accounts, while bolstering their emergency or traditional savings funds.

However, many experts agree that it's important to prioritize both goals by using a staggered strategy. For example, households can begin by making minimum payments on their credit accounts, and devote more to savings until they accrue $500 to $1,000 dollars, depending on their goals. After they have a cushion, they may choose to put more toward their credit card or loan debt – while still making smaller contributions to savings – until they have chipped away at a sizable percentage. This teeter-totter method can help individuals accomplish both goals without having to sacrifice too much of their income.

Each situation is different, however, and working with a professional financial advisor or enrolling in credit counseling can be an effective way to receive personalized help for individual circumstances. 

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