What Americans Are Doing with Their Gas Pump Savings – The Street
- March 26, 2015
- By: Greenpath Financial Wellness
NEW YORK (MainStreet) — Gas prices remain low, recently hitting an average $2.43 per gallon that gives consumers an extra $1.09 per gallon compared with a year ago at this time. What are they doing with all that extra cash from gas pump savings?
The answer seems clear: paying off debt.
A study from American Consumer Credit Counseling estimates 70% of Americans say they are using cash from savings at the pump to “pay off debt, pay bills and expenses, or to increase savings.” Sixty-five percent of survey respondents say there are saving $10 very time they fill up, while 26% say they are saving between $20 and $40, but only 3% said they were using the money to make “new purchases.”
“It’s good to see that so many consumers are being smart about using the extra money they have,” says Steve Trumble, chief executive of American Consumer Credit Counseling. “Applying a significant portion of any new source of available cash to eliminating debt and increasing savings is a good step toward financial health.”
Over the course of a full year (and assuming gas prices stay relatively low), Americans can expect to save between $500 and $700 from the collapse of oil and gas prices, says Thomas Scanlon, a financial advisor with Raymond James in Manchester, Conn. The best use of that savings is to pay down the most cash-draining debts first, he says. “Mathematically it makes sense to pay down credit card debt, particularly a card with higher interest rates,” Scanlon says. “According to Mint, the average person carries credit card debt with a balance of $7,000, so that’s a great place to start.”
After credit card debt, building an emergency fund is a good way to use gas savings, says Kevin Gallegos, a vice president at Freedom Financial Network in Phoenix, Ariz. “Ideally, this fund should include six to nine months of living expenses — i.e., the amount needed for absolute expenses, which is usually different from the salary one lives on,” he says. “The fund provides protection. In case of an emergency or unexpected expense, you don’t need to rush to a credit card, or worse yet, a payday loan.”
Another tip: Start a special holiday spending account, separate from your checking and savings accounts. “Even saving $10 a week starting now could mean over $350 in cash come December,” says Andrew Johnson, communications director at GreenPath Financial Wellness, a Farmington Hills, Mich., nonprofit debt solutions organization. “This will take pressure off your credit cards when it comes to holiday shopping.”