Saving Is Sexy Again

February 22 to March 1 is America Saves Week. It’s a good opportunity to take a closer look at your saving and spending patterns and perhaps ratchet up the former to help you weather the recession.

Some said it couldn’t be done.

Americans’ personal savings rate is on the rise again after a long, gradual slide that started in the spring of 1985.

The recession finally prodded American to boost their savings rate, to 4.8%, in May 2008, according to historical data from the U.S. Department of Commerce, Bureau of Economic Analysis. The bureau has tracked America’s savings rate on a monthly basis since January 1959.

The data show that Americans were more dedicated savers through the 1960s, 1970s and into the early 1980s, with saving rates ranging between 7% and 12%. (The personal rate of savings peaked in May 1975 at 14.6%.)

Then, from May 1985 on, the savings rate consistently remained in the single digits, between 6% and 8%. It was a time of relative economic prosperity, greater reliance on imports, increased personal consumption and higher federal defense spending.

The personal savings rate continued in a generally downward direction, and it remained below 6% from 1994 on. In 1994, the U.S. was considered the world’s most competitive economy even as it ranked #1 in the widening gap between rich and poor.

An absolute low point in savings was reached in August 2005 when the personal savings rate dropped to -2.7%. The economy would begin to cool off sharply in the fourth quarter of that year.

If historical rates of saving are any indication, it seems as if tough times rally long-dormant frugality, but that times of prosperity distract from saving.

Does your personal rate of savings vary according to necessity, or are you steady as she goes?

Tags: America saves, American savings rate, saving is sexy, savings rate

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