Americans’ personal savings rate is nearing record low, economic analysis shows

The rate at which Americans are saving money has fallen near a record low, a new report shows.

According to the US Bureau of Economic Analysisthe personal savings rate fell to 2.3%, from 7.3% a year earlier and from 33.8% in April 2020.

In fact, this is the lowest rate since July 2005, when the rate hit a record low of 2.1%.

The US Personal Savings Rate is personal saving as a percentage of disposable personal income. In other words, it’s the percentage of people’s income that remains after paying taxes and spending money, the agency explains.

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According to the US Bureau of Economic Analysis, the personal savings rate dropped to 2.3%.

During the COVID-19 pandemic, the saving rate increased significantly. With restaurants and entertainment venues shuttered, experts say, Americans had fewer things to spend money on.

“The current low savings rate primarily reflects higher current consumption that has been postponed due to the pandemic,” Arabinda Basistha, a West Virginia University economics professor, told FOX Television Stations. “Additional savings and fiscal support during the pandemic are driving higher consumption.”

He continued: “The other indicators of the financial health of American families appear fairly stable and capable of withstanding moderate risks to the economy. For example, the financial obligation ratio, which measures debt service payments, rent, auto leasing, homeowners insurance and other as a percentage of disposable income is 14.3% in the second quarter of 2022. This is lower than the average of 14.8% in 2019 and the average of 17.6% in 2005-2007 before the great recession”.

American savings accounts begin to dwindle

A study published by Northwestern Mutual 2022 Planning and Progress earlier this year revealed that a solid majority (60%) of Americans say they have been able to build up their personal savings in the last two years, but it is declining.

Year-over-year figures showed that the median amount of personal savings dropped from $73,000 to $62,000 between 2021 and 2022.

But other studies paint an even more dire picture when it comes to Americans and their savings accounts.

In June, the Federal Reserve reported that 36% of Americans do not have enough money to cover a $400 emergency expense.

Financial experts have even weighed in on the financial state of many Americans.

“In 2022, Fidelity’s Financial Fitness Checkup surveyed the adults for whom we administer employer financial benefits and found that fewer than one in two had enough emergency funds to cover typical living expenses for three months.” Megan Moore, Vice President of fidelity flowerhe told FOX television stations. “And nearly one in four had less than a month’s living expenses saved up.”

What are the challenges for Americans saving money?

Several factors can inhibit a person’s ability to save money for a rainy day.

In 2016, The Atlantic proposed several theories about why Americans have trouble saving. Factors may include lower wages, mortgage debt, and materialism.

Moore said that some people may have trouble balancing enjoyment and the necessities of life.

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“First, people have a hard time finding the right balance between living an enjoyable lifestyle today and saving money for the future,” he said. “Many people mistakenly believe that you can really only have one or the other, but not both at the same time.”

Moore added: “Secondly, managing cash flow from week to week can be challenging. When the money you earn, spend and save is all mixed up in the same accounts, it can be really confusing to unravel how much you have available on any given day. to spend safely and how much you shouldn’t touch and save.

How can Americans start saving?

Moore said that for those who live paycheck to paycheck, saving any amount of money counts.

“The easiest way to start saving is to put it on autopilot,” he said. “Create an account for money you shouldn’t spend unless it’s an emergency, and set up automatic transfers to deposit a portion of your paycheck or money from an existing bank account on a regular basis.”

Other experts also share similar sentiments.

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“When you start a savings plan, the best way to manage it is to decide that you are going to set aside a little money or establish with your payroll where you are going to put $200 $250 or if it will be $500: start small and put that money in another account in a separate bank outside of where you normally spend and where your bills will come from,” Randy Jones, a wealthy financial advisor based in Northern Virginia, he told FOX 5 DC. “When you get to the end of the month, if you haven’t touched that money, then you know you can start saving it and constantly tap into it to rebuild your savings if you were to dip into it.”

This story was reported from Los Angeles. Chris Williams contributed.

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