Where do America’s biggest savers live? Using IRS and U.S. Census data, MagnifyMoney created a City Saving Score for over 2,000 U.S. cities to explore which cities have the most savers and which cities have the biggest savings accounts.
On average, 29 percent of Americans who filed tax returns in 2016 earned interest income on their savings. Average interest income was $530 per return, representing 0.8 percent of total reported income. But regional, demographic and economic forces drive some cities to become super savers while others languish behind. Residents of Greenwich, Conn., earned an average of more than $25,000 in interest income per resident, while in Camden, N.J., just 4 percent of the residents had enough savings to require reporting to the IRS.
Why is there so much variation?
In this report, MagnifyMoney reveals America’s super saving cities, and the forces driving their success as savers.
- Scarsdale and Garden City, N.Y., are tied for #1 as the cities with the biggest savers overall, with a City Saving Score of 99.6 out of 100.
- Los Altos, Calif., has the highest concentration of savers — 71 percent of residents reported interest income on their tax returns.
- Greenwich, Conn., residents earned the most from interest on savings — over $25,000 per filer.
- Among cities with incomes under $150,000 a year, The Villages, Fla., had the biggest savers with a City Saving Score of 98.5.
- Camden, N.J., had the lowest activity among savers — only 4 percent of residents reported interest income and an average $8 a year in interest.
- Communities in the New York, Washington, D.C., Los Angeles, San Francisco and Chicago metros represented over 75 percent of the top 5 percent of city saving rankings.
Behind the rankings: The ‘City Saving Score’
There is no comprehensive data that shows the average amount Americans are saving at a metro or city level, so we had to get a bit creative to determine where the biggest savers live.
To rank cities, MagnifyMoney created a “City Saving Score.” Using data for over 2,000 cities, MagnifyMoney ranked cities based on three factors:
- Breadth of community savings (measured by the percentage of all tax returns that declared interest income, ranked by percentile).
- Dedication to savings relative to income levels (measured by the percentage of total income that came from interest, ranked by percentile).
- Magnitude of savings in the community (measured by the average interest income per tax return, ranked by percentile).
Top cities for big savers: Scarsdale and Garden City, New York
Scarsdale, N.Y., and Garden City, N.Y., scored the highest marks on our City Saving Score, with scores of 99.6 out of a possible 100.
They have an obvious advantage on the savings front — Scarsdale residents report an average income of more than $450,000 per tax return, putting them in the top 1 percent of earners in the U.S. today.
On average, savers in Scarsdale declared $9,258 in interest income — 17.5 times as much as the average American saver, who declared $530 in 2016.
Scarsdale savers are also enjoying a higher savings rate than many others. According to the IRS data, 2 percent of their income came from interest earned from savings accounts, which is 2.5 times the national rate of 0.8 percent.
It’s not just the savings volume driving Scarsdale’s place at the top. Two-thirds of Scarsdale residents reported interest income on their tax returns in 2016. That’s more than twice the national rate of 29 percent.
In Garden City, N.Y., residents earned just over $247,000 on average, putting the average household in the top 5 percent of American earners. Just under two-thirds (64 percent) of Garden City residents report income from interest.
However, with the average Garden City resident declaring $5,520 in interest, that represents 2.2 percent of overall income (10 percent more than their peers in Scarsdale, and almost three times the national rate).
The city where (almost) everyone saves: Los Altos, California
In addition to focusing on the amount people earn from their savings, we wanted to look at the share of savers in each city, which gives us an idea of a community’s total commitment to saving. The IRS requires anyone who earns more than $10 in interest income to declare interest income on their tax return. Even in the current low-interest environment, many middle-income savers could have qualified to declare interest income in 2016.
Among the top 10 cities with the most savers, two (The Villages, Fla., and Sun City West, Ariz.) had average incomes below $100,000 in 2016. Both cities feature large retirement communities, and these residents may have a higher propensity to keep their investments liquid compared with younger residents.
However the city with the most savers was Los Altos, Calif., where the average reported income is $476,000 annually. In Los Altos, nearly three-quarters (71 percent) of residents were savers. This is more than double the national average of 29 percent. The average interest income in Los Altos, Calif., was $5,299 — 10 times the national average.
Sky-high interest income in Greenwich, Connecticut
Greenwich, Conn., may not have the highest share of savers in the country (just over half (52 percent) of the city’s residents declared interest income on their tax returns in 2016). But their savers are making a bundle on earned interest.
Average interest income per return for the 2016 tax year was $25,451 — more than 48 times the national average of $530. If savers in Greenwich earned an average of 2% interest on their savings, the average saver would have held nearly $1.3 million in savings. The more than $25,000 in interest income constitutes 3.8 percent of the average reported Greenwich income, which is $664,000 annually thanks to a large number of hedge fund managers and other finance executives living in the area.
In terms of absolute interest income, Greenwich savers lead the pack by a wide margin. Second place Beverly Hills earns $16,638 in interest, just two-thirds of the Greenwich rate. In third place, Scarsdale earns $9,258.
Where do the biggest savers live?
Over three-quarters (77 percent) of the cities with scores of 95 or above came from just five major metro areas. These include the New York Tri-State area, the Washington, D.C., metropolitan area, San Francisco Bay Area, Southern California, and Chicago. Retirement communities in Arizona and Florida also feature prominently in the top saving communities, while just 15 percent of all major savings hubs are outside one of the areas mentioned above.
High saving doesn’t require high income
All cities with average incomes in excess of $250,000 earned a savings score of 90. However, some cities with lower incomes made surprise appearances near the top of the savings ranking.
In fact, 14 cities with incomes under $150,000 a year had scores of 95 or above in our study. Many of these “thrifty cities” have large retiree populations like The Villages, Fla., and Sun City West, Ariz. However, other thrifty cities included family-oriented suburbs where average households earned an upper-middle-class income.
- Agoura Hills, Calif. (96.6 score), a Los Angeles suburb where a quarter of all residents are under the age of 19. Average income among tax filers in the city is $137,000, 60 percent of the average income of other top saving cities. Despite having more children and lower incomes than most other big saving cities, half of Agoura Hills households reported interest income. The average saver in Agoura Hills earned $1,913 per year in interest, 3.6 times the national average of $530.
- Arcadia, Calif. (95.7 score) is another Los Angeles suburb with an average reported income of $101,000. In addition to modest average incomes (by Southern California standards), nearly 1 in 4 residents in Arcadia is under the age of 19. This means that plenty of households have to pay the high costs of raising kids. In spite of this, 48 percent of taxpayers report interest income, with the average return boasting $1,420 in interest income.
- Towson, Md. (95.1 score), home of Towson University. In the Baltimore suburb, half (49 percent) of filers report interest income from savings. Despite an average reported income of $125,558, savers earned an average of $1,464 in interest income in 2014.
Where saving isn’t happening
Although rising interest rates are a boon for savers, plenty of communities will struggle as consumer debt rates rise, and income prospects remain middling. The cities with the lowest savings scores are spread throughout the country, but they have a few things in common. The average reported income in the bottom 5 percent was $35,000. That’s 41 percent less than the median income household in the United States today.
Most of the worst saving cities lost job-heavy industries over the course of the last 20 to 50 years. Rust Belt cities like Detroit, Mich., and East St. Louis, Ill., over-represent the bottom 5 percent in savings ranks. Likewise, former industrial towns in the Northeast like Camden, N.J., and Chester, Pa., also fell into the bottom 5 percent of saving cities. Many of the worst saving cities suffer from declining populations as younger generations seek economic opportunities elsewhere.
METHODOLOGY: How we ranked cities with the biggest savers
To rank cities, MagnifyMoney created a “City Saving Score” on a scale of 0 to 100 that included three equally weighted components:
- How broadly members of the community saved (measured by the percentage of all tax returns that declared interest income, ranked by percentile).
- The community’s dedication to saving regardless of their income (measured by the percentage of total income that came from interest, ranked by percentile).
- The absolute magnitude of savings in the community (measured by the average interest income per tax return, ranked by percentile).
MagnifyMoney measured these factors using anonymized data from tax returns filed with the IRS from January 1 to December 31, 2016. ZIP code level data was translated to a city level using the primary city assigned to each ZIP code. The study was limited to cities with a combined primary ZIP code population of 25,000 or more.
To be counted as a saving household, the taxpayer must declare interest income using a form 1099 on their 2016 tax returns. Any filers who earned over $10 on investments, including a high-yield checking or savings account, a CD, a money market account or certain types of taxable bonds, would have reported this income to the IRS.
Interest income is an imperfect way to measure a particular community’s dedication to saving. Many people keep their cash in low-yield checking accounts, and some savers will not use financial instruments declared on Form 1099. In many parts of the country, savers and investors may prefer to build wealth using stocks, real estate or other forms of investments while keeping lower cash reserves.
Despite these drawbacks, interest income from the 1099 form represents a useful proxy for overall savings. The financial instruments that require 1099 reporting include many types of liquid savings that are easily accessible with negligible risk. Most people use interest-bearing accounts to hold funds for use in the case of job loss or a related emergency, or to mitigate consumer debt by paying for larger purchases in cash.
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