Are you saving more or less money than you were 10 years ago?
According to the Bureau of Economic Analysis the 1st quarter of 2009 indicates that Americans are saving more now than they have in over 10 years. The chart below shows the savings rate (as a percent of disposable income) and the fluctuations we have seen in the last decade.
What is interesting to note is that back in the 80s people were saving more than 10%. I wonder if we will see double-digit savings rates return in light of the recession?
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What an interesting cycle this is. People don’t have any money saved because they haven’t been saving, so they panic when there’s a problem with the economy, then they save more. Then they’ll save less and less gradually and the next time there’s a bump in the road people will panic because they don’t have enough saved. Maybe if more of us had saved before the recession things wouldn’t be quite as bad.
I was looking at these numbers a few weeks ago and came to the conclusion that the ‘saving’ is actually just holding onto money until things seem to turn around. My feeling is that once the economy recovers (in the opion of hte masses) those dollars will flow from bank accounts to store registers. But, hey I’m no prophet. I sure hope these numbers indicate a fundamental change in peoples approach to saving.
Thanks for the great article.
The Great Depression had a huge impact the way people viewed their money. I’m not sure this recession is “bad enough” to get people to fundamentally shift their paradigm view of money.
When the economy is humming along and things are great people put less emphasis on saving and more on consuming. When things turn sour they emphasize the opposite. My guess is that we’ll see the same thing happen again.
This is proof that even with the dark cloud of the recession, there’s a silver lining of positives in the background. The higher savings rate is probably paving the way for the next upturn, when yes it will likely fall once again.
But there’s a variable here too. Savings plummeted in the 90s and early 2000s largely because of the easy availability of credit, and an expected return of 15-20% per year in the stock market. The finance world and it’s media friends were telling all who would listen that savings made no sense in that environment.
So how much the savings rate declines in an improved economy will probably have a lot to do with credit and stock market returns. Historically, the middle and working classes saved as a means of survival to prepare for less generous times. We should always be doing that, but easy credit and double digit investment returns make it easy to abandon common sense. Since our society is getting older as the Baby Boomers age, we should be saving more anyway. Only time will tell.
well, it looks like americans are more concerned now about their futures, isn’t it ?
it’s not possible now a days to save money in huge amount but you could try to save enough for future to be one way smooth drive way. once you get on it you gonna find new ways to live.
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