Americans Aren't Saving Any Money

[jeffrey]

Many experts are predicting that a new government report from the commerce department out tomorrow (Monday) will show that for the first time ever that household saving is in negative territory. The monthly Personal Income and Outlays report has been issued since 1947 and measures household savings. This is done by taking what households spend on gasoline, housing, food and other goods and services and comparing those expenses to the income households earn after taxes.

Even though Americans have had lower saving rates compared to many other countries, they were still saving some money. As recently as the early 1990s, Americans were saving 7% of their disposable income although the savings rate had diminished to less than 1% in the past year.




Experts believe one of the main reasons for the low savings rate is the current strong housing market. More and more consumers are relying on the equity built up in their houses as their savings and a place to find extra money. With the increasing ease of home equity loans and mortgage refinancing, households are able to tap more money beyond their income.

While having savings cross over into negative territory will be symbolic, experts point out that the savings rate is now so small that it will likely have little actual effect on the economy. The bigger worry is that interest rates will continue to rise cutting off the non income stream of money from housing that consumers have been relying on for their spending.

[CorkyCarson]

I agree. In fact I just listed a link to your article on my Active Investor Blog at Journalspace. But as I said in my comment, I blame the government for doing nothing to encourage savings.

If a home owner taps their equity in the form of a home equity loan for perhaps a kids tuition or something, at least they can write off a portion of their intrest payments on their yearly income taxes.

But on the other hand if the same money is saved to pay tuition the intrest payed on the savings is taxed as ordinary income and is quite a paltry return right now anyway. Yes, this situation may be bad for the nation over all, but I can't say I blame the individual given the circumstances and the cards that the government has dealt them.

Anyway, I thought your article on the subject was very good and should be quite an eye opener for us all.

[byusteeler]

I think that the low interest rates are part of the savings problem. If you save money at less than 1% and the inflation rate is 4% you have actually lost money. I do have a savings account that is still paying 2.5% with no ties. My credit union has been offering 12 month CD's with a rate of just under 4% but it requires a $5000 minimum.

[jacquelynrose]

I think that people don't save because they do not have enough discipline to Save. But then again this is my own personal opinion. It took me a long time to Save. My excuse was "I will wait till next year" and now I realize how and why it is important to Save and I am trying my best to do it.

Research is the key for higher interest.

Jacquelyn

[PrincessPerky]

Ok now I hate blaming hte government for anything, mostly cause it is rather hard to change, so I like to focus on what can change. BUT the constant finangling of the intrest rates, what did they expect to happen when they are trying to get people to spend? you can't have it both ways.

Either encourage people to save, or encourage them to spend. has much as I hate to say it, all the finagling does work - Short term. In the long term the finangling is what causes most of hte money complaints here. then of course they go back and finangle some more to try and fix it, and then more, and more .