Search
  • Evan Werckenthien

United States Personal Savings Rate

Updated: Aug 4

Is it safe to assume everyone has seen the new U.S. savings rate report that came out on May 1st? Okay- – probably not, but that is what I am here for.  The U.S. personal savings was 5.9% of disposable income according to the Bureau of Economic Analysis’ most recent report.  Before we get into whether 5.9% is good, bad, or about average, let’s look at how the savings rate is calculated (in case you want to play along at home).


The personal savings rate is defined as the percent of disposable income (all earning minus taxes) that is saved.  That means for every $100 of disposable income, Americans save on average just $5.90.  The current rate of 5.9% is up from the 2005 low of 1.9%, but has been hovering around 5% for the last few years.


During the financial crisis of 2008 and 2009, the savings rate increased by almost four full percentage points.  This increase in savings makes logical sense.  If individuals and families do not feel confident about the future, they are more inclined to save; having 6 months of emergency funds provides more of a cushion than just one.  The tradeoff is that when individuals save more, that usually decreases their spending.  Finally, when individuals are not spending as much, the economy does not grow as quickly.


More importantly, 5.9% is far too low of a savings rate, as many projections and budgets prefer savings rates closer to 20% – 25%.  Saving money is needed for down payments on homes, emergency funds, funding college, and an important phase of your life called retirement…  (Proper levels of emergency funds, budgeting, and retirement savings were mentioned in previous posts).


Finally, what everyone have been waiting for. How does the U.S. stack up against other countries?  Below are a handful of countries personal savings rates from 2015:

–          China 30%

–          Germany 9.7%

–          Japan 0.6%

–          European average is around 8%

–          Denmark -1.8% (probably too many Danish pastries – – they are addictive)


The takeaway is that the U.S. could be in worse shape, but we need to continue to increase our savings rate.  Student loans and other types debt play a large role in personal savings.  As American’s student loans and other debts are paid off, we all would be well served if some of that money was saved.  If that happens, it will provide stability and security for years to come.


If you fall below the U.S. average of 5.9% or even 10%, do not panic. In fact, there is no better time to start savings more than the present.  Increase retirement savings, open a Roth IRA, increase emergency funds, all will help increase your savings rate.  You will thank yourself down the road!


Feel free to reach out with any questions,


Evan Werckenthien, CFP©


Evan@EWwealth.com

Work: 317-587-0858

Cell: 317-627-2529


Disclosure:

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. E.W. Wealth Management and Cambridge are not affiliated. The information in this email is confidential and is intended solely for the addressee. If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this fact. We cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 317-587-0858. This email service may not be monitored every day, or after normal business hours. Cambridge does not provide tax advice.

Sources

https://bea.gov/newsreleases/national/pi/pinewsrelease.htm

https://www.bloomberg.com/news/articles/2015-05-01/chinese-consumers-cling-to-saving-suppressing-spending

http://www.oecd-ilibrary.org/economics/household-saving-rates-forecasts_2074384x-table7

0 views

Check the background of your financial professional on FINRA's BrokerCheck.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA / SIPC . Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. E.W. Wealth Management and Cambridge are not affiliated.

Check the background of E.W. Wealth Management,  Evan Werckenthien on FINRA's BrokerCheck

Licensed in AZ, CT, FL, IL, IN, KY, NC, OH

This website is not part of Facebook or Facebook Inc. Additionally, this site is NOT endorsed by Facebook in any way. FACEBOOK is a trademark of FACEBOOK Inc.

Privacy Policy & Terms and Conditions 

Cambridge Does not offer legal or tax advice.  PLEASE NOTE: The information being provided is strictly as a courtesy. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to. We make no representation as to the completeness or accuracy of information provided at these websites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this website.