Not Saving

Since I like to point out economic indicators that suggest the US economy is relatively strong, I should also point out some things that aren’t such good news: Personal savings drop to a 74-year low:

The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases.

As tax rates are down, employment is up, and inflation is fairly tame, this seems to suggest personal habits and is not really a reflection on the national economy. Still, it’s a troubling trend that could impact the national economy down the road.

I know that I don’t save as much as I’d like. But, like my salary, I don’t know if I’d ever really think more wouldn’t be better.

Comments

  1. Ironicly, my savings rate is at a 40 year high. The bummer is, the government taxes the interest, dividends, and capital gains earned on my income taxed money I saved. Not sure why more Americans aren’t taking advantage of this opprotunity to pay more taxes.

  2. The ruin of us all … no savings … wait I feel a song coming on….. ‘Brother, Can You Spare a Dime,’ lyrics by Yip Harburg, music by Jay Gorney (1931) They used to tell me I was building a dream, and so I followed the mob, When there was earth to plow, or guns to bear, I was always there right on the job. They used to tell me I was building a dream, with peace and glory ahead, Why should I be standing in line, just waiting for bread? Once I built a railroad, I made it run, made it race against time. Once I built a railroad; now it’s done. Brother, can you spare a dime? Once I built a tower, up to the sun, brick, and rivet, and lime; Once I built a tower, now it’s done. Brother, can you spare a dime? Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum! Say, don’t you remember, they called me Al; it was Al all the time. Why don’t you remember, I’m your pal? Buddy, can you spare a dime? Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum! Say, don’t you remember, they called me Al; it was Al all the time. Say, don’t you remember, I’m your pal? Buddy, can you spare a dime?

  3. Now there is a school of thought that states that the savings rate is being effected by people converting their savings to capitol by buying homes. Thus people are using their homes as a savings vehicle, which of course is not measured in the savings rate.

  4. Wife saw an article that only 6% of credit card holders are paying off the full debt every month. Which we manage to do. Which is probably why there isn’t a Porsche or F350 or bass boat in the driveway.

  5. My question posed to my bank manager when we were discussing personnal savings………Why should I put my money in a savings account which is paying 0.35%? At that rate, any interest is being swallowed by inflation.

  6. Oldforce – We live the same way. When I see other parents picking their kids up at school in a $50k SUV, I wonder if they are really rich or in debt up to their ears.