Recent data from the United States Census Bureau shows that 95% of households have a checking account, while only 77% had a savings account in 2022, the most recent year statistics were available. That number drops even farther when looking at the data by state, showing a major gap across the U.S. These are the seven states with the lowest percentages of households with a savings account.
[Read: Best Savings Accounts.]
What Is a Savings Account?
A savings account is a financial vehicle that allows you to put money away and earn more interest than you would with a checking account. Savings accounts can also be helpful for separating money that you want to put away from money that you spend. Some states may have lower percentages of savings accounts because their populations may not have as much income or may not understand the benefits. Here’s a breakdown of the states, their household income and poverty rates, which can affect the ability to save.
Households in These 7 States Have the Lowest Percentage of Savings Accounts
1. Mississippi
Mississippi has the lowest savings participation rate, as only 59.6% of households have a savings account. In contrast, Utah has the highest percentage of households with savings accounts at 93.6%. One factor that can affect savings rate is income. Census data for the state of Mississippi shows that the estimated median household income as of 2023 was $54,203. That’s significantly below the median income in the U.S., which is $77,719. Additionally, 18.0% of Mississippi residents live in poverty, in contrast to 12.5% in the U.S. overall.
2. Oklahoma
A few percentage points higher than Mississippi, 62.2% of households in Oklahoma have a savings account. The estimated median household income in Oklahoma is also higher and as of 2023, stood at $62,138. Oklahoma has a lower poverty rate of 15.9% compared to Mississippi, but still higher than the national average.
3. New Hampshire
New Hampshire is a small state — the fifth-smallest in the U.S. Based on Census survey data — and only 65.2% of households in New Hampshire have a savings account. Compared to other states and the U.S. average, the estimated median household income as of 2023 was quite high, coming in at $96,838. Additionally, the poverty rate is relatively low at 7.2%. This makes New Hampshire an outlier in this list.
4. Kentucky
With a slightly higher percentage rate than New Hampshire, 65.9% of Kentucky households have a savings account. However, the estimated median household income is nothing like New Hampshire, coming in at $61,118 as of 2023. The poverty rate is higher than the national average as well, at 16.4%.
5. Alabama
Jumping a couple of percentage points, 67.1% of Alabama households have a savings account. In Alabama, the estimated median household income was $62,212 in 2023, while the number of residents in poverty stood at 15.6%.
6. Arkansas
The number of households with a savings account in Arkansas is exactly one percentage point more than residents in Alabama at 68.1%. While the savings participation rate is slightly higher, incomes in Arkansas don’t keep up with Alabama. The estimated median household income in Arkansas is $58,700 and the poverty rate in the state is 15.7%.
7. Louisiana and West Virginia
Louisiana and West Virginia tie for the percentage of households with a savings account, coming in at 68.3%, despite differences in household income and poverty rates. Louisiana has an estimated median household income of $58,229 as of 2023, while West Virginia’s is $55,948.
Though Louisiana benefits from having a higher household income, the state also has a higher poverty rate than West Virginia, at 18.9% compared to 16.7%.
[See: Best High-Yield Savings Accounts]
The Unbanked and Underbanked
The Census data outlines which states are lagging behind and highlights the overall percentage of residents with a savings account. Though the states listed have the lowest percentages, it’s important to consider the unbanked and underbanked as well.
According to The 2023 FDIC National Survey of Unbanked and Underbanked Households, about 5.6 million households in the U.S. are unbanked. This equals 4.2% of households without a checking or savings account from a bank or credit union.
The FDIC survey also shows that 19 million households, or 14.2% of all U.S. households, are underbanked. Underbanked refers to households who may have a checking and savings account but use nonbank products such as nonbank money orders and payday loans.
One major nuance is the difference in banking access and wealth by race. Black, Hispanic and Native Americans have unbanked rates that are several times higher than white households, despite making progress in recent years.
Federal Reserve data from the 2022 Survey of Consumer Finances also shows that white families typically have six times as much wealth as Black families. Compared to Hispanic families, white families have five times as much wealth.
Additionally, the data shows that liquid wealth (cash and funds in a checking and savings account) didn’t budge much for Hispanic families and actually dropped for Black families when comparing 2022 data to 2019 data.
Why Savings Accounts Are Important
Saving is one of the main pillars of financial wellness. A savings account is a way to lessen the impact of an unexpected expense or emergency. It can also help finance your dream vacation or make a major purchase without incurring debt.
“I think if someone has short-term financial goals that they want to achieve within the next five years, and they have the ability to save, a savings account could be a good vehicle for them to use for this purpose,” says Roger Ma, certified financial planner at lifelaidout.
Savings accounts are a great option for storing emergency funds while earning interest.
“The benefits of a savings account include separating money for savings from money for your day-to-day living, to prevent you from accidentally spending money for your savings goals,” says Ma. “In addition, savings accounts often have higher interest rates than checking accounts, particularly high-yield savings accounts. So simply moving money from a checking account to a savings account could ensure your money is still working for you.”
How to Start Saving
The first step is to find and open a savings account. If you don’t have a savings account or want to switch accounts, look at:
— APY. The annual percentage yield on your savings account directly affects how much interest you can earn on your deposits. Shop around to find the most competitive rates.
— Mobile banking. According to the FDIC survey, in 2023 nearly half of banked households used mobile banking as the primary way to access their accounts. Look for highly-rated mobile banking apps for accessibility.
— Fees. Check for potential fees like monthly maintenance or minimum balance fees that can take a bite out of your savings.
In addition, make sure the savings account you choose comes with certain protections. FDIC protection is a must, says Jason Fannon, certified financial planner and senior partner of Cornerstone Financial Services.
It’s never too late to open a savings account. Once you do, you’ll want to set up automatic transfers between your checking and savings accounts.
“For those that want to save money, whether that’s a savings account or another investment-type vehicle, I think the automated strategy is what we try and encourage clients to do from the checking account,” Fannon says. “It’s just like a bill. Just think of it as a utility bill or a car payment. You would transfer that money out into the savings account, and you’re paying yourself, essentially.”
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