U.S. Personal Savings Rates Drop to Lowest Point Since Great Recession
The U.S. personal saving rate, or what percentage of a consumer’s disposable income is left over after they pay taxes and spend money, reached its lowest level since the Great Depression when it fell to 3.3 percent in Q3 from 3.4 percent in Q2. Personal savings in the third quarter hit $626 billion, down from $4.85 trillion in the second quarter of 2020 when the government was providing stimulus checks.
“Much of this figure is driven by the highly progressive fiscal support during the early part of the pandemic,” said the Federal Reserve Board of Governors in an October statement. “While balance sheets of many lower-income households may have been bolstered by these programs, some households may have fallen through the cracks of the social safety nets.”
Market Watch noted that the pandemic greatly affected the saving rate, as people are now spending more since they are not cooped up in their houses. However, the pandemic has also left some in a vulnerable position living paycheck-to-paycheck, especially as wages have not reflected rising inflation. Stimulus checks offered during the pandemic led to a record decline in households without a bank account, which fell to 5.9 million in 2021 from 7.1 million in 2019.
Janet Lee Krochman, a certified public accountant in California, recommended automatic drafts from checking accounts into high-interest savings accounts to boost savings, as keeping money “out of sight” keeps it “out of mind” and helps avoid impulsive spending. Ted Rossman, a senior industry analyst at Bankrate, also recommended looking for a higher-paying job or asking for a raise.
Most economists have predicted that a recession wouldn’t arrive until next year. In the meantime, they have recommended paying off high-interest debt, keeping track of spending, buying generic brands, and cutting back on nonessential items and eating in restaurants.
“Sell stuff you don’t need. Drop little-used subscriptions. Cutting a recurring monthly expense has 12 times the impact of doing the same thing just once,” Rossman said.