Americans Save Less, Spend More
Posted on February 1, 2006 9 Comments
Americans save less, spend more
Personal savings rates fall to lowest levels since the Great Depression
Tuesday, January 31, 2006
By MARTIN CRUTSINGER
OF THE ASSOCIATED PRESS
WASHINGTON, D.C. – Americans spent more than they made last year – something they haven’t done since the Great Depression, a time of massive unemployment and soup lines.
This time the trigger was good economic news – a booming housing market, which has made millions of American homeowners feel wealthier and thus more willing to spend with abandon.
Government statistics released Monday showed they may have gone overboard with all of that spending, consuming all their after-tax income and then some.
The Commerce Department reported Monday that Americans’ personal savings rate fell into negative territory, minus 0.5 percent, last year. That means people spent all their after-tax income and then had to dip into previous savings or borrow more to finance their consumption.
The savings rate has been negative for an entire year only twice before, in 1932 and 1933 – two years when Americans were having to deplete savings to cope with the massive job layoffs and business failures caused by the Great Depression.
Read more here:
http://www.pjstar.com/stories/013106/NAT_B8RNGJMT.025.shtml
Just thought you’d like to know.
Category: Old Posts
Comments
9 Responses to “Americans Save Less, Spend More”
Leave a Reply
About the Author
Archives
Categories
Tags
February 1st, 2006 @ 1:05 pm
So sad….Goes back to the post about choices. When these people have a rainy day (and there will always be one at some point) they have only to look at themselves for not having an emergency fund.
February 1st, 2006 @ 4:54 pm
If you get a chance please research and write about how this statistic is calculated. From my understanding the main causes of the negative savings rate is the spending of retirement savings, stock gains, and cashing out of home equity. To a point it indicates that some Americans are well invested and have begun spending some of their savings.
February 1st, 2006 @ 7:08 pm
I am so in the saving less and spending more majority.
February 1st, 2006 @ 9:31 pm
The Government can put forth all the propaganda they want about how the economy is improving, but as a small business owner who works primarily wtih other small businesses, I surely am not feeling or seeing any economic upswing. After a slightly better calendar year last year, January has been dead for us. Jeff is correct in that statistics are a rather squirrelly science, though–as with polls (which can be affected by how questions are worded and the order in which they’re asked), stats can be manipulated to show a wide variety of outcomes. Stats aren’t like “2+2=4.”
February 2nd, 2006 @ 12:58 am
yeah…I just saw that statistic too (maybe in Newsweek?) and consider my mind blown.
February 2nd, 2006 @ 6:47 pm
Yep. I read a very similiar article this morning – http://moneycentral.msn.com/content/invest/extra/P124952.asp. Amazing. The bank rates are dropping, and that is why I use online savings like Emigrant-direct or ing-direct which yields 4.25% APY.
I still think Americans can save, no matter how little their salary is, like putting away $25 a month, is still good.
February 3rd, 2006 @ 5:44 pm
The economy looks bright to me. I’m a small business owner as well, and I’ve booked more business in the month of January than any one of the 12 months in 2005. And I anticipate more growth! Americans don’t save enough. Just when they start to build a little equity in their homes – they use it to buy SUV’s they can’t afford in the first place. So all the talk about people tapping equity is indeed interpretted incorrectly. I used to work for a bank – and yes, people do not save enough! IRA contributions for those people that have IRAs is at an all time low!! So, are Americans really well invested? No. It’s the “entitlement” mentality. Stats may not be as easy as 2+2=4, but how low can unemployment actually go before people “believe”? There’s always an element that doesn’t want to work. And there’s always some amount of unemployment in any economy. Thank goodness our economy doesn’t mimic that of the liberal Europeans!!
February 3rd, 2006 @ 11:02 pm
The economy always looks bright for some, but it’s not bright for all. And unemployment stats don’t tell the whole story, either–working minimum wage or at a significant pay cut is better than unemployment, but it doesn’t mean the economy is strong, either. In the past few weeks, I’ve read news reports that there is no county in the U.S. where a single person who is earning minimum wage–or not significantly above minimum wage (and there are a lot of those)–can afford a place to live. (Gotta have a roomie whether you want one or not.) Productivity is also down. My clients are having trouble getting paid from their customers, which means they have trouble paying me, and also means they can’t use us as much as they normally like. Just because there are people having a tough time in this economy doesn’t mean they’re “just not willing to work”–I work my fingers to the bone!
February 21st, 2006 @ 7:56 pm
While at an investment conference earlier this month, the manager of the mutual fund that is one of my core investments was asked about the low savings rate of Americans. He had two comments.
1. Spending more than your income? Doesn’t that sound like retirement?
2. He made inquiries into how that conclusion was made. The gov’t has ways to measure spending. The gov’t has ways to measure income, but it does not have a way to measure savings or appreciation of assets. When you pay capital gain taxes, that is considered “spending”. The appreciation of assets like your home or IRA, 401(K), and other investments are not part of the “saving” equation.
Considering the poor quality of personal finance education in this country, I don’t doubt that there are a significant number of people who are playing the housing game and are highly leveraged as well as those who haven’t seen the light and actually think that Social Security will a) still exist and b) support the lifestyle they dream about.