America Saves – Less

This is America Saves week.

If there was one encouraging result from the “Great Recession” it was that personal savings increased. However it looks like that trend has reversed itself and we are returning to our accustomed low rates of saving. In a post in Real Time Economics on the Wall Street Journal’s site Jeffrey Sparshott gave some information from a survey released earlier in the week.

A new survey released Monday found that only 68% of all Americans are spending less than they earn and saving the difference. That’s down from 73% in 2010, the first full calendar year after the recession ended. Some 64% of households have emergency funds, down from 71% in 2010. The survey found 76% are reducing their consumer debt, down from 79% in 2010.

We know that saving is a necessary part of good stewardship. Proverbs 21:20 says “precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it” (ESV). The New Living Translation renders this verse “The wise have wealth and luxury, but fools spend whatever they get” (NLT). Saving is part of good stewardship that focuses on a productive economy. Spending more than your means is associated with a view of economics, that while very popular, is not sustainable into the longer run. You simply cannot consume more than you produce. We may think we can, as we borrow from future wealth to consume today and as the government continually spends more than it takes in in revenue and as the Federal Reserve pumps liquidity into the global economy, but sometime the “joyride” will end.

Let’s look at this reported decline in saving in a longer-term context. The diagram below is created from data provided by the Bureau of Economic Analysis for the years 1952 through 2013.
SavingsRate

You can clearly see saving declining from the mid 1970s until the time of the Great Recession. There is an upward spike in personal saving during the recession and and you can see the savings decline reported in the current survey in that last downtick on the graph. Examined in this longer term perspective, the increase in savings that was a result of the Great Recession appears to be an anomaly in a long-term trend of lower saving rates.

We can’t really expect our federal government to spend within it’s means if a large number of its citizens do not. Perhaps the issue with the national debt and continual deficit spending is more of a problem with our individual and collective economic character – our representatives do represent us. If we want our government to repair its financial house perhaps we should repair ours first.

23 thoughts on “America Saves – Less”

  1. How is it that over 30% of Americans spend more money than they earn? Certainly they recognize that this standard of living is unsustainable and that they can’t just print more money or take out another loan whenever they feel like it. However, I guess that does explain why so many people don’t see our nation’s enormous deficits and $17 trillion debt as much of an issue.

  2. Is there data that could show maybe some of that 30% is spending on things they would have purchased during the recession but were not able to?

  3. As J. Wellington Wimpy, a hamburger-loving character from the Popeye cartoons, said over and over in the 50s. “I would gladly pay you tomorrow for a hamburger today…” Things haven’t changed all that much. It’s just that the lenders are saying sure why not here’s the money, it looks like you need another hamburger, just sign here no money down, no finance charges if … Of course there was another funny man of that era that said; “a sucker is born every day”. Our financial system is just better at milking our greed today, especially knowing if things go bad their uncle Sam will bail them out. No problem…be happy!

  4. And by the way, who got hurt more than we savers in the last meltdown. Why save when when our uncle Sam stands ready with the bailout? When inflation finally wipes out the National debt not to mention my savings, who will have the last laugh then? Come on get with the program.

  5. I believe that Americans today are wary to save money out of fear of losing value through Inflation. While inflation discourages saving money due to lost value over time, inflation theoretically helps to nullify and erase debts. This is precisely why the federal government is able to continually spend beyond their means and pile on debt for the future. The Federal Reserve is worried that inflation rates are not rising quickly enough. Of course, all this just helps to scare and intimidate individual Americans to buy now and worry about the bill later.

  6. The data is actually worse than this, if I recall correctly. Much of the upward spike in “saving” after the recession was not actual savings, but debt elimination as debts were written off. So when peoples houses were foreclosed, their debts were eliminated such that it appeared as savings. If that is the case, it would explain why the savings rate has edged back down; the rate of foreclosure has simply decreased.

  7. I like your point on expecting our government to run a surplus when us as Americans do not. We must reflect what we want our government to do, but as easy as it is to say though, we can assume that our government will still run a deficit. Saving does not help stimulate the economy, but it does help the individual financially in their debt or saving for later on in life. When we do not spend, prices rise because people can afford higher prices with the money they are saving. So in the end it all works out again because of the shift in demand. As Christians, we are called to be stewards of what God has given to us and we should always be asking the question “how can much of what God has given to me can I give back to Him.”

  8. This article was very interesting. It is definitely easy to spend money you don’t have when the consequences will be in the future. When one does not feel directly affected, why not keep spending money? The current mindset is spend lots of money but not work to get the money needed. If this does not change, our economy will continuously struggle.

  9. Unfortunately, as long as the repercussions of our decisions are in the distant future people will choose to ignore them. It’s all about the here and now. Concerning the declining trend in personal savings from disposable income, it just shows that we are becoming less and less accountable for what God’s chosen to bless us with. Whether this is because of a lack of education in the realm of financial savings is another subject, but as the graph above shows, we will blindly take for granted the fact that our economy is doing alright. Only when there is a wakeup call (recession) will we make any changes.

  10. It’s crazy to believe that only 68% of Americans are saving a part of their earnings. It makes sense when you think about it though. We live in an extremely materialistic culture that is consumed with flaunting the newest gadget or hottest clothing item. People put their identity in these things which in turn enslave them spiritually as well as monetarily.

    We as Christians must not fall into this trap of materialism. We must realize that our money is not ours, but God’s. Every time we buy something we should ask “Is this purchase a good use of the money God has given me to advance his kingdom?”. I have been very convicted about this topic recently, and I have realized that I have been making some superfluous purchases that my Master would not be proud of.

    Not only is this habitual spending on unnecessary items being a poor steward of God’s resources, it is also economically unwise. Like mentioned in the blog post, “you cannot consume more than you can produce.” If people do continue to spend more money than they have, then we are going to have another financial crisis where more people are unable to make house payments and lose their homes. To prevent this catastrophe, people must learn to be good stewards of what God has given them and learn to save.

  11. Wow, this is very disturbing! This article definitely makes one realize the importance of frugality. I think one reason for this frivolity is the increase in credit card use. Credit cards seem to mask the effects of directly spending money. When you spend cash, you physically lose some money you once had (and you see it, in a physical sense). Credit cards distance consumers from what they’re spending. People often don’t realize how much they’ve spent until it’s too late.

    Many things can be recognized as causes of the rise in spending. However, as Christians, we must realize that we are to be stewards of God’s money. Spending money you don’t have is never a good idea. Generosity and giving to the poor is different than spending money lavishly on yourself. This trend in America needs to be reversed.

  12. The data shown is this article is quite frightening to look at. If we want to be better off as individuals and as a country we must save our resources. We have a trade-off to make between consuming and saving. We need to choose the latter, if we want our economy to be better off in the long run. Saving helps us be able to save up resources and so we can be better off later. Our culture loves to spend their money as soon as they get it, but they need to go against the temptation and save up their resources.

  13. While the American people are to blame for growing consumerism, they also have been encouraged by government policies and media. Politicians tell Americans to “go buy a car” during the economic downturn. A few years ago, banks gave a loan to basically anyone with a pulse. These policies offer seemingly “free” money and after awhile, Americans have adapted their behavior to spend more and save less. Also, credit has made it possible for many Americans to spend beyond their means without immediate consequences. All this spending is made possibly from the savings and investment of previous generations. But, if this current generation does not save and invest, the next generation will reap less goods and more debt. Americans nee to grow future-orientated, meaning more saving and less spending.

  14. This is a telling perspective I previously had not known or heard of. As the national debt increases and the budget is annually released, dissenters have innovatively scaled the numbers to more tangible amounts, really they remove a bunch zeros for each aspect of the budget but somehow the numbers still work to prove a point.
    Follow this URL: http://www.thedailyeconomist.com/2012/07/if-us-government-were-household.html
    I suppose it is true that the government has a spending problem, and is accurately representing the people, because individual households also spend more than they earn. I would still argue that this happens to be a trend proven by averages and so it is easier to do this in the DC sphere than on Main Street because members of congress do not see an immediate consequence of their monetary legislation whereas Mr. and Mrs. Smith realize at the end of the month they cannot buy bread because they went to Cedar Point for a weekend.

  15. This post was really interesting. It’s very important to remember the scripture passages such as Proverbs 21:20 when we are spending and saving money. I know, for me, it can be hard to save money, but it’s important we are frugal. As many have said, our Government doesn’t know how to stop spending and that it’s reflecting upon us. This is very true. Our habits are fueled by the Government and it’s becoming a never ending cycle.

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  17. Dr. Wheeler,
    Thank You for this very interesting and thought provoking article. Personally, saving is a very important principle and it is interesting to see some data about our country’s saving trends. Personally, I find that the problem our country faces today is the mental attitude when it comes to spending. The “Why wait when I can have it now” mind set. Whereas in the past people were very leery of taking loans, not willing to borrow more than could be paid back in a timely manner.

  18. This was a really interesting and insightful article! I know first-hand that it’s incredibly easy to spend money you don’t have when the consequences will be in the future. Especially in our society today, we often times think only of our instant gratification, and less about how the actions we take now will affect us in the future. When don’t see the consequences happening right in front of our eyes, they can slip by right under our nose. The American economy has struggled with this immensely, by the use of credit cards. People spend the money they don’t have to spend, and then complain when they can’t pay it off. Our habits are fueled when we think that the government can just bail us out of every bad situation we put ourselves in. This trend needs to stop now before it’s too late.

  19. I also found it baffling that over 30% of Americans spend more than what they have. This is so sad and is probably one of the main reasons why our country is in so much debt.I wish that Americans could be better stewards of their money because it has affected the entire country now.

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