Recent government statistics have highlighted Americans’ difficulties with saving money and covering basic or emergency expenses. According to the Federal Reserve’s Survey of Consumer Finances, 44.6 percent of American families do not save; fifteen percent of families regularly spend more than they receive in income; and nearly half of families do not have a retirement account. Additionally, in its most recent Report on the Economic Well-Being of U.S. Households, the Federal Reserve reported that four in 10 adults would have difficulty covering a $400 emergency expense without borrowing money or selling something.
Not surprisingly, living paycheck to paycheck has contributed to rising household debt, especially for housing, education, and credit cards. According to the New York Fed, household debt reached a record high of $13.67 trillion in the first quarter of 2019, a $993 billion increase over the previous peak of $12.68 trillion at the onset of the Great Recession (third quarter of 2008).
But Americans’ financial situations are not just about their spending, borrowing, and saving decisions. Many Americans struggle to save because the ability to save depends a lot on location. The cost of living varies significantly across regions, states, and cities. Some locations might offer higher salaries, but are notorious for sky-high rents and expensive goods and services that will eat into a larger portion of its residents’ salaries. Similarly, unemployment rates vary widely across cities, affecting employment opportunities, and as a result, the average amount that people can save.
Using data from the U.S. Bureau of Economic Analysis, the U.S. Census Bureau, and the Bureau for Labor Statistics, researchers at Credit Sesame, a credit score and management platform, wanted to find the cities where it’s easiest to put away money. To do this, Credit Sesame created a composite score for each major metropolitan area based on the following factors: cost-of-living-adjusted income (aka real personal income), housing costs relative to income, and unemployment. Here’s what they found.
Takeaways
- Across the largest 100 metropolitan areas, there are extreme differences in real per capita income. Even when adjusted for cost-of-living differences, real personal income across the largest metropolitan areas ranges from over $100,000 in Bridgeport-Stamford-Norwalk, CT to a low of $24,805 in McAllen-Edinburg-Mission, TX.
- Similarly, the prices of housing, goods, and services change dramatically by location. At the upper extreme, current monthly housing costs in the Los Angeles-Long Beach-Anaheim, CA metropolitan take up more than 50 percent of median household monthly income. Whereas, in Wichita, KS, that number is just over 17 percent. Likewise, the price of goods and services ranges from 27 percent above the national average in San Jose-Sunnyvale-Santa Clara, CA to 15.5 percent below the national average in McAllen-Edinburg-Mission, TX.
- Despite unemployment rates at record lows nationally, certain metropolitan areas have far healthier job markets than others. Certain metropolitan areas like Honolulu, HI and Madison, WI have unemployment rates below 3 percent. On the other hand, three large metros in California—Bakersfield, Fresno, and Stockton-Lodi—have unemployment rates above 7 percent.
- The result is large geographic differences in families’ ability to save. Cities in the South and the Midwest tend to have comparatively low costs of living for the salary (more favorable “real incomes”), whereas most cities on the east and west coasts have higher costs of living. In California and the Northeast in particular, people must allocate a larger percentage of their income to housing. The main outliers on this list are Washington, D.C. and Worcester, MA, which are two Northeast cities on the top 15 list.
The cities most favorable for savings have a combination of low unemployment rates (4.2 percent or below), real personal incomes above $49,000, and housing costs at or below 30 percent of median income. Whether you’re starting a family, launching your career, or planning for retirement, here are the 15 large cities where it’s easiest to save money.
15 cities where it’s easiest to save money
15. Durham-Chapel Hill, NC
- Real personal income: $49,315
- Housing percent of income: 29%
- Unemployment: 4.0%
- Median home price: $313,297
- Median 2-bedroom rent: $1,210
14. Dallas-Fort Worth-Arlington, TX
- Real personal income: $51,099
- Housing percent of income: 29%
- Unemployment: 3.6%
- Median home price: $317,255
- Median 2-bedroom rent: $1,482
13. Portland-South Portland, ME
- Real personal income: $50,871
- Housing percent of income: 30%
- Unemployment: 2.6%
- Median home price: $323,437
- Median 2-bedroom rent: $1,476
12. Raleigh, NC
- Real personal income: $50,444
- Housing percent of income: 24%
- Unemployment: 4.0%
- Median home price: $313,754
- Median 2-bedroom rent: $1,206
11. Worcester, MA-CT
- Real personal income: $51,242
- Housing percent of income: 25%
- Unemployment: 3.9%
- Median home price: $271,433
- Median 2-bedroom rent: $1,266
10. Austin-Round Rock, TX
- Real personal income: $51,566
- Housing percent of income: 27%
- Unemployment: 3.1%
- Median home price: $337,871
- Median 2-bedroom rent: $1,368
9. Richmond, VA
- Real personal income: $51,685
- Housing percent of income: 24%
- Unemployment: 3.9%
- Median home price: $282,179
- Median 2-bedroom rent: $1,122
8. Madison, WI
- Real personal income: $53,595
- Housing percent of income: 26%
- Unemployment: 2.5%
- Median home price: $278,337
- Median 2-bedroom rent: $1,266
7. Milwaukee-Waukesha-West Allis, WI
- Real personal income: $51,444
- Housing percent of income: 23%
- Unemployment: 3.5%
- Median home price: $221,900
- Median 2-bedroom rent: $1,005
6. Washington-Arlington-Alexandria, DC-VA-MD-WV
- Real personal income: $66,733
- Housing percent of income: 25%
- Unemployment: 3.7%
- Median home price: $418,726
- Median 2-bedroom rent: $1,958
5. Minneapolis-St. Paul-Bloomington, MN-WI
- Real personal income: $56,723
- Housing percent of income: 25%
- Unemployment: 3.2%
- Median home price: $298,347
- Median 2-bedroom rent: $1,429
4. Indianapolis-Carmel-Anderson, IN
- Real personal income: $49,681
- Housing percent of income: 20%
- Unemployment: 3.3%
- Median home price: $191,665
- Median 2-bedroom rent: $878
3. St. Louis, MO-IL
- Real personal income: $49,519
- Housing percent of income: 19%
- Unemployment: 3.7%
- Median home price: $177,307
- Median 2-bedroom rent: $901
2. Des Moines-West Des Moines, IA
- Real personal income: $50,677
- Housing percent of income: 19%
- Unemployment: 2.9%
- Median home price: $225,716
- Median 2-bedroom rent: $948
1. Omaha-Council Bluffs, NE-IA
- Real personal income: $53,613
- Housing percent of income: 20%
- Unemployment: 3.0%
- Median home price: $215,533
- Median 2-bedroom rent: $988
Methodology
To identify the best cities for saving money, Credit Sesame created a composite score based on the following data:
Real personal income (40%): The term “real personal income” refers to income that is adjusted for regional differences in cost of living and inflation. The resulting data allows for a better comparison of the relative buying power across major metropolitan areas. For each metro, real per capita personal income was sourced from the U.S. Bureau of Economic Analysis. The statistics used are from the May 2018 release, and include income from paychecks, business ownership, employer-sponsored supplements, rental property, interest, dividends, Social Security, and other government benefits. Capital gains from changes in stock prices are not included.
Housing costs relative to income (40%): Median home listing prices and median rental prices for 2017 were sourced from Zillow. Median household incomes for renter- and owner-occupied units were sourced from the U.S. Census Bureau 2016 American Community Survey 5-Year Estimates. For each metropolitan area, a weighted average was computed based on the proportion of renters and owners.
Unemployment (20%): Unemployment rates were sourced from the U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics. The unemployment rates shown are from June 2018.
Cities with real personal incomes, housing costs relative to income, or unemployment rates worse than the national averages were filtered out. The final list was ordered by the composite score.
