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6 Reasons Why Americans Are Savings Again

A couple of years ago I remember hearing about the Personal Savings Rate for the citizens of the United States. I distinctly remember the results because I was immediately startled at the number: -2.2%. The average American was spending more money in a year than he/she acquired! I suppose I shouldn’t have been surprised. I had friends that were buying everything on credit: big screen TVs, furniture, video game consoles, and of course, brand new vehicles after graduating college. My friends were buying $30,000 before they even got their first job! It was crazy, but the most crazy part was they fact that I was the only one that thought it was crazy (Yeah, that’s right, I just used the word crazy three times in one sentence)! Since everyone was doing it, the added debt just seemed completely normal. But, we all know what came next.

When the economy slumped in late 2007, and still continues to hurt today in late 2010, I think America got the hint. Initially, Americans watched the lower middle class as they struggled to make their mortgage payments, and soon had their homes taken away by the banks. I think at that point, some of us just shrugged it off and didn’t think much of it. “So a few people couldn’t keep up with their mortgage payments, no big deal, that’s not going to affect the overall economy.” In late 2008 and into 2009 we saw not only the sub-prime mortgage loans go south, we started seeing the $200,000 houses getting foreclosed on. Then it was the $500,000 houses, and then we all started seeing those million dollar houses being taken over by the bank! What happened? No matter the social status, all of America was putting all of their eggs in one basket, their houses! Because the housing market was no longer a money maker, the market was actually stumbling backwards and we were all in trouble.

An article recently came out in August by MSN Money stating that personal savings in America is at a new high; nearly 6% of every paycheck was being saved. This is much better than -2.2%, but keep in mind that the Japanese save over 20%. I think we still have some learning to do. But regardless, why are we finally saving? Mainly, the answer is fear, but here is my list of reasons that I have witnessed in the past few years.

Americans are saving because…

1. They realize that their house is no longer an investment. They cannot count on it to gain 10-15% in value every year.

2. The life of living on credit has become stressful and the recession has been an eye-opener to their over-spending.

3. The stock market is extremely volatile. There has been much discussion regarding a second recession (or double dip if you will). If this is comes to fruition, no one wants to have money in the stock market.

4. They are still nervous of job loss. It’s happened again and again. It seems that no one is safe from getting the ax.

5. They wish to have a sense of security. With all of the recent uncertainty, a little cash in the bank has a way of taking the stress away.

6. There are more Americans that are striving to be debt free. With Dave Ramsey taking the nation by storm, many people are getting out of debt and creating an emergency fund for themselves.

Money Save Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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