California is home to nearly 40 million residents, making it the most populous state in the United States. With its large and diverse population, California is also home to many Savers. But just how many Savers live in the Golden State?
What is a Saver?
A Saver is someone who consistently saves money on a regular basis. Savers make saving a priority and have savings goals in mind. They contribute to retirement accounts, emergency funds, and other savings vehicles. Frugality and smart spending habits allow Savers to consistently set aside money.
Savers stand in contrast to Spenders, who use most or all of their income for current consumption. Spenders prioritize present enjoyment over future financial security. They spend freely on entertainment, dining out, clothes, electronics, travel, and more. Spenders lack long-term savings discipline and rarely meet savings goals.
Between these two extremes are people who save moderately or occasionally. They may have some retirement savings but don’t maximize contributions. They enjoy spending but try to save here and there. These moderate savers don’t have the consistent long-term savings habits of dedicated Savers.
Why does the Saver population matter?
The size of a state’s Saver population has implications for economic growth and stability. High Saver populations indicate residents who plan ahead financially and delay gratification. States with more Savers are likely to have:
- Higher credit scores
- Lower consumer debt levels
- Higher retirement preparedness
- Greater ability to weather economic downturns
Savers also invest capital back into the economy through vehicles like stocks, bonds, mutual funds, and real estate. Their savings get recycled into business loans, venture capital, and other growth-driving areas. Thus, states with a large Saver population tend to experience stronger and more sustainable economic growth.
Estimating California’s Saver Population
Unfortunately, there is no definitive tally of Savers by state. However, we can estimate California’s Saver population using available data on retirement savings and household finances.
Retirement Plan Participation
One indicator of Savers is participation in employer-sponsored retirement plans like 401(k)s and 403(b)s. Retirement savers demonstrate financial discipline by consistently contributing to these tax-advantaged plans. According to the Center for Retirement Research at Boston College, 49% of California workers participate in an employer retirement plan. That equates to roughly 7.6 million worker participants based on California’s workforce size.
IRA Ownership
Individual Retirement Accounts (IRAs) are another popular savings vehicle favored by Savers. California has approximately 6.4 million IRA owner households according to the Investment Company Institute. After adjusting for households with multiple IRA owners, we can estimate 4.8 million unique California households with IRA accounts.
Emergency Savings
A key habit of Savers is accumulating emergency savings to handle unexpected expenses. Bankrate’s Financial Security Index finds that 57% of California adults have savings to cover at least 3 months of living expenses. With California’s adult population around 28 million, that translates to 16 million residents with adequate emergency savings funds.
Debt Levels
Savers avoid excessive debt by spending within their means. Only 35% of Californians have credit card debt, below the national average of 45%. And California residents have $3,889 in average credit card debt, versus $5,525 nationally. The prudent use of credit shows financial discipline consistent with Savers.
The California Saver Profile
Compiling these data points allows us to profile the prototypical California Saver:
- Participates in 401(k) or similar employer plan
- Owns an IRA
- Has emergency savings funds
- Carries little or no credit card debt
- Contributes 10-15% of income to savings
- Delays gratification by limiting spending
- Invests savings for future goals
This fiscally responsible profile describes approximately 12-14 million California adults. Given the state’s population of 29 million adults, that equates to a Saver rate of 40-50%.
California Saver Population Projections
Looking ahead, expect California’s Saver population to grow steadily.
Favorable trends include:
- Increased IRA and 401(k) availability and participation
- Growth of target-date and passive index retirement funds
- Improvements in financial literacy and budgeting skills
- Focus on reducing consumer debt
Additionally, policy initiatives like CalSavers will expand retirement plan access to more Californians. CalSavers requires employers without plans to auto-enroll workers in state-sponsored IRAs. This nudging technique should significantly boost retirement contributions.
On the other hand, rising costs of living will challenge some Savers. Housing, healthcare, and education costs take a bigger bite out of paychecks. Still, sound budgeting principles can overcome these savings headwinds.
Overall, expect the Saver share of California adults to reach 50-60% by 2030. The Golden State will solidify its reputation as a fiscally responsible society with citizens who save, invest, and plan for the future.
Geographic Distribution of California Savers
California’s Savers are not distributed evenly across the state. Certain regions have demographic and economic advantages that foster higher Saver concentrations. Here is the geographic breakdown of Saver rates:
| Region | Estimated Saver Rate |
|---|---|
| San Francisco Bay Area | 55-60% |
| Sacramento Area | 45-50% |
| Los Angeles County | 40-45% |
| San Diego County | 50-55% |
| Central Valley | 35-40% |
The Bay Area leads with 55-60% Savers given high education levels, well-paying tech jobs, and historically prudent money management. Coastal Southern California also trends higher due to above-average incomes and low unemployment. Inland areas like the Central Valley lag due to lower wages and educational attainment.
San Francisco Bay Area
The San Francisco Bay Area boasts one of the nation’s highest concentrations of Savers due to its prosperous innovation economy. Abundant tech, engineering, and finance jobs provide high incomes that allow generous savings.
Bay Area Savers are also disciplined about maxing out tax-advantaged retirement accounts and minimizing debt. Luxury spending and status displays are discouraged in the socially progressive and eco-conscious region. The Bay Area’s depth of financial expertise and coaching also cultivates sound money management.
Major employers like Google, Apple, and Intel offer lucrative compensation packages with excellent 401(k) plans to attract top talent. This fuels a virtuous cycle of savings and investment that amplifies wealth over time.
Los Angeles County
Despite LA’s Hollywood image of flashy wealth and consumption, the region has a strong Saver contingent. The county’s business, professional, academic, and arts communities include many high earning households with smart financial habits.
Plus, LA’s ethnic diversity brings frugal sensibilities from Asian and Latino immigrant groups who emphasize thrift and savings. Continued increases in college graduation rates will likely raise the Saver share higher going forward.
However, Los Angeles does have significant income inequality that reduces Saver rates among disadvantaged communities. Targeted financial literacy programs could help narrow this gap.
Central Valley
California’s inland Central Valley has the lowest concentration of Savers, estimated at 35-40% of adults. Agricultural regions like Fresno and Modesto have lower average incomes and education levels than coastal urban areas.
High poverty rates also hinder savings ability. Over 25% of Central Valley households live below the poverty line versus 15% statewide. Lower earnings make it very difficult to accumulate assets and invest for the future.
On the bright side, the Central Valley’s affordable real estate and slower pace of living help moderate expenses. Teaching budgeting skills and savings habits in schools could also boost Saver rates going forward.
Racial and Ethnic Differences in Savings
Within California’s diverse population, savings patterns vary significantly across racial and ethnic groups. Understanding these differences can guide more effective financial literacy efforts.
Asian Americans
California’s Asian American population has the highest rates of saving and investment. Over 70% participate in retirement plans compared to 55% average across all ethnicities. Asian households also have lower debt ratios and higher median incomes.
Cultural values that prioritize financial security, education, and thrift drive these saving patterns. Delayed gratification and forward thinking financial habits are ingrained from an early age. Asian investment in small businesses also recycles savings back into the economy.
White Californians
Whites have the second highest Saver rates at 50-60% across the state. High education, earnings, and homeownership support disciplined savings into retirement and investment accounts. With whites still holding most of California’s high paying managerial and professional jobs, this advantage will likely persist.
Hispanic Californians
Hispanics make up 40% of California’s population but have lower Saver rates around 30-40%. Lower average wages in agriculture, food service, and hospitality make saving difficult. Plus, only 25% of Hispanic workers have access to employer retirement plans.
However, Hispanics value family cohesion and mutual financial support. This provides a cultural foundation to build stronger financial literacy and formal savings habits. As incomes and education levels rise for Hispanic Californians, so will their Saver rates.
Black Californians
Like Hispanics, Black Californians face economic hurdles that hinder saving. Just over 30% participate in retirement plans, reflecting lower job availability and pay. Household debt ratios tend to be higher as well.
But promising trends like rising college completion rates, entrepreneurship, and targeted savings programs can boost engagement. California’s new CalSavers program also aims to expand retirement plan access.
Policy Actions to Increase California’s Savers
State and local governments can implement policies to accelerate Saver population growth. Potential actions include:
- Expand retirement plan access through auto-enrollment
- Increase financial literacy education in schools
- Provide savings matches and incentives for lower-income groups
- Simplify the process of opening IRAs and other investments
- Create targeted savings programs for education, home buying, and entrepreneurship
- Incorporate savings cues and prompts into government communications
- Study savings habits across demographic groups and publish lessons learned
California already has bold initiatives like CalSavers to expand retirement savings. Now the state must commit to advancing financial literacy and savings incentives for vulnerable groups. Partnerships with businesses and non-profits can also strengthen these efforts.
Getting to a 60% statewide Saver rate by 2030 could inject billions more into California’s economy. More importantly, it would give millions of families greater financial security and upward mobility. That’s something all Californians have a stake in achieving.
Conclusion
Savers are the bedrock of sustainable economic prosperity. Fortunately, California is already home to an estimated 12-14 million Savers based on retirement plan participation, IRA ownership, emergency savings, and prudent use of debt.
This Saver population of 40-50% of California adults concentrates in coastal and urban areas with higher incomes and educational attainment. The Bay Area leads with 55-60% Savers due to high compensation in the tech economy. Los Angeles and San Diego also benefit from strong professional and creative job sectors.
But mismatches persist, with Asian Americans having much higher savings rates than Blacks and Hispanics. Closing these gaps through targeted financial literacy programs must be a priority. With smart policies and incentives, California can drive Saver rates up to 60% and unleash the economic power of disciplined savings and investment.
