What Affects the U.S. Savings Rate [Infographic]

My friends over at GoBankingRates.com sent me this infographic, which shows a few interesting facts about the U.S. Savings Rate. The first box shows the U.S. household savings rate dropped from 6% in 1993 to less than 1% in 2006. However, some say that the savings rate calculation is faulty. Regardless, it is a good reminder that saving is fundamentally important to your finances, and despite what the data is saying, your personal savings rate is something you should keep your eyes on.

The second box shows that Americans tend to save a larger percentage of their disposable income in times of economic turmoil — nothing surprising there. But a safer policy is to keep your debt level low, make sure you have a healthy emergency fund at all time, and have a good plan to deal with financial emergencies.

The third box shows recent mortgage, refinancing, and home improvement borrowing activities. These graphs show our tendencies to chase returns. As the biggest housing boom was happening, more and more people poured money into the market — either in fear of not being able to get into a house if they waited too long, or didn’t want to miss out on the bull run — unfortunately, we all know what happened next.

Without further ado, here’s the infographic…

This infographic was created exclusively for Moolanomy by the good folks at GoBankingRates.

About the Author

By , on Oct 19, 2010
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (2 Comments)

  1. ctreit says:

    Greenspan argued a few years ago that the low savings rate was okay in the US, since household’s balance sheets looked good even with higher debt as house prices were making the asset side look better. This was correct until we realized that asset prices do not only fluctuate to the upside but can also go down, while debt stays the same until you pay it off. Households don’t have much choice but to be net savers now, which also includes paying down debt.

  2. Imagine the state of our economy if we did the opposite of what these numbers suggest? But, as you said, only shrewd money managers have enough discipline to do that!

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