It wasn’t too long ago that there were predictions that the falling oil prices would save the average American family about $550 a year. That savings estimate has continued to grow as oil prices continue to fall. The US Energy Information Administration (EIA) is now predicting the average US household will save as much as $750 this year due to lower gas prices. For families who live in areas of the US where propane and heating oil are used to stay warm during the winter months, they may benefit from an extra $750 in savings on these costs. That means that some families will save as much as $1500 simply due to the lower cost of fuel.
Even better for the family budget is that this is after-tax money saved. It’s much more beneficial to a family than if a person within the family had received a $1500 raise, because there’s no need to pay any taxes on it. This money can be saved, or supplement other parts of the family budget which had to be cut in order to balance the budget when gas prices were high.
While this may not seem like a lot to some families, it is a huge amount to the working poor, and those living paycheck to paycheck. It gives them a little budget breathing room, and the opportunity to pay off debt and begin building savings. The best course of action is for those families who have been on tight budgets to save some of this unexpected windfall for the future. It’s an excellent time to use some of the saved money to build an emergency fund for those who don’t currently have one. This can easily be accomplished with a gas savings challenge.
Another important reason to put away some of this savings is because these low prices aren’t likely to last forever. In fact, while prices are expected to stay low for the near future, they are predicted to rise as the year goes on. As the EIA report notes that retail gas prices averaged $2.14 a gallon on January 12, which was the lowest price since May 2009. They expect these prices to stay in this range for the first quarter of 2015 ($2.16), but then will begin to rise. The report predicts gas prices for 2016 will average $2.72 a gallon. While still well under their all time highs, it’s still a significant increase over what prices are today.
(Photo courtesy of Zepfanman)