Question of the Day: What’s The U.S. Savings Rate?

This chart from the Federal Reserve provides a historical look at the savings rate, which has varied from 2% to 17% over the last fifty years.  My students are always surprised to see the chart showing how low the national savings rate is today (5.7% based on July 2014 data).  This provides a good opportunity for a discussion about the optimal savings rate for individuals and families.

A sampling of follow-up questions you may want to review with students:

  • Why is saving important?
    • Build wealth, save for emergencies, if you save for short and long-term goals will reduce need to borrow, compound interest increases the importance of saving at a young age, etc.
  • What has been the most recent trend?
    • Has been increasing recently but still quite low as compared to historical levels.
  • What impact does saving have on consumer spending?
    • Saving actually reduces consumer spending so can have a dampening effect in the short run on the economy since 70% of economy driven by consumer spending.
  • Was your guess higher or lower than the actual figure which is close to 6%?
    • Most will guess higher; may want to discuss why they think it is so low.  Low interest rates may be playing a role today;  I was saving money from my newspaper route in 1979-1980 when interest rates were up to 15% for CDs which might explain the high savings rate during that period.
  • What do you think is a good saving target to shoot for your individual situation?

One thought on “Question of the Day: What’s The U.S. Savings Rate?

  1. Pingback: Top Posts Last Week on the Next Gen Personal Finance Blog | Next Gen Personal Finance (formerly CFCI)

Comments are closed.