The Christian Science Monitor reports that "Americans have stopped saving for a rainy day. Instead, they are living paycheck to paycheck, depending on credit cards to get them through emergencies, and hoping that the rising value of their homes will give them a retirement nest egg."
This is a pretty telling chart:
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I’d like to see a longer, multi-year (or multi-decade) version of this.
Here’s some more:
"The nation’s paucity of savings is raising alarms from the Federal Reserve to consumer watchdogs who worry that the nation is counting on foreign savings to maintain a spendthrift lifestyle. Some groups are cranking up advertising campaigns to try to remind Americans that they don’t need to participate in every sale.
And there are now high-level suggestions that the tax system needs to be changed to encourage savings instead of spending."
Pretty intriguing. . .
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Source:
Spendthrift nation
By Alexandra Marks and Ron Scherer
The Christian Science Monitor, August 03, 2005
http://csmonitor.com/2005/0803/p01s02-usec.html?s=itm
“Some groups are cranking up advertising campaigns to try to
remind Americans that they don’t need to participate in every sale.”
And yet consumer spending is one of the few things that is driving
the economy.
So what should we do? Keep spending (and not saving) so the
economy doesn’t collapse, or stop spending and start saving so
we’ll have savings when the economy collapses?
Decisions, decisions… :-)
We have been changing the tax system to encourage savings for 25 years. Every time we change the tax system to encourage savings the saving rate falls.
Maybe we should try to explain why changing the tax sytem to encourage savings seems to have a perverse impact before we keep following the same policies.
Barry,
Here’s personal savings since 1960
http://research.stlouisfed.org/fred2/series/PSAVERT/112/Max
I have a plot of this for the last 40 years up at http://www.econbrowser.com/archives/2005/07/which_came_firs.html
“Some groups are cranking up advertising campaigns to try to remind Americans that they don’t need to participate in every sale.”
Brilliant. Advertising targeted at reducing sales. Only in America, right?
As someone noted elsewhere, for the past 25 years or so the good times have been rolling here. We’ve had a couple of slow years, but the rapidity with which these have passed have encouraged everyone to think that hard times are something that happen only to people who don’t work hard enough. Doom and gloomers have been proved wrong by events for so long that nobody bothers listening any more.
And who really knows how long the party will last?
I’m sorry, but was that headline about the US consumer or the United Sates Congress? Did you readers know that since Mr Bush has taken office…he has yet to veto a single spending bill put on his desk. Fact, no political bias there.
Along the lines of saving people money with the tax code… I found it saddening that there were no financial incentives in the recent energy bill for individuals.
Possibly along with giving BP money to build massive wind farms, they could give benefits to rurual and suburban customers who install env-friendly personal power generators, such as wind or solar. If, by the use of incentives, I could make wind power pay for itself in 5 years instead of the approximate 10 years it would now take… I’d very quickly write a check to do so.
I notice they didn’t extend the rebate for hybrid cars, which isn’t so bad, since they’re now a much more viable option for most people (read: no more ugly mofos).
I think the second part to this is that home prices have had a minor impact. In my part of the world, most people seem to be moving into houses that are bigger and better with any free money they have. Though, a possible trap, most people see it in the same light they see a top grade corporate bond fund…. good reliable 4% per year ’til they retire. Too bad they can’t afford anything else… but with the tax break, that 4% seems much more.
Chad: here is a decent financial incentive from me to you: USE LESS GAS, SAVE MONEY.
I wonder how they track “savings” anyway. I keep nothing in what is deemed a regular “savings” account, since the interest rate on it is so low. I have a money market fund that I use to transfer into my checking account when needed. There is a substantial amount in the money market that is probably not counted as “savings”, so yes, my “savings” would effectively be zero, even though it isn’t really….
The Big Picture: U.S. Savings Rate = 0%
One of the biggest lessons to learn is good stewardship of your money. Regardless of your financial worldview, be it a Christian worldview like ours, or a basic secular look at finances, it is obvious that increased savings equals financial
Why should people bother to save, when they’re only getting a 0.5% return?
When 90 day T-bills were returning 5% and my mutual funds making me into a regular Donald Trump I was saving like crazy. Now today… I can’t find anywhere to put my money that doesn’t suck.
BARRY RESPONDS:
Dude, 0.5% ? even a checking account pays more than that today
The 10 year bond is now 4.4%
FWIW… I live approximately 1.2 miles from work, as the car drives… (less than a mile if i could fly)..
Most days I drive (in a car that is getting 31mpg on average [calculated at fillup]). Some days I walk. In the end, incentives on hybrids will only entice me in the sense that the new Accord Hybrid is actually the nicest accord you can buy. In reality, my non-hybrid car will likely get better mileage based upon my driving conditions.
So, when *I* talk about incentives for myself, I’m speaking to the things like the minor deduction they added for purchasing newer efficient appliances, etc… which of course, is much less savings than just waiting for a sale…
My only point with my statement was that unless we do something to get people to be more thrifty with their energy usage, the problem will continue to grow. I’m usually what most people would call extreme-right… I don’t like the government giving handouts to anyone… but I feel that the energy (read: oil) usage in this country is a severe danger to the overall economy (in the long term)… and has many possible national security implications.
Our increased energy efficiency since the late 70s has made what would be equiv to $80 a barrel (peak in the 70s) closer to $115 today. Efficiencies and use will have a greater effect on long term energy prices than almost anything else (barring nightmare scenarios).
I think we’re better off influencing consumption to go away than influencing more energy production, but there’s no reason that both can’t be done.
Link to chart from BEA on personal savings rate since inception:
http://research.stlouisfed.org/fred2/series/PSAVERT/112/Max
I suspect it would be educational to display a chart of US savings rates next to a chart of US credit card company charges and fees rising over the same period.