Americans are saving more money
Posted
Jun 02 2009, 10:34 AM
by
Kim Peterson
Rating:
All it took was a financial crisis followed by a recession to get Americans to start pocketing their cash. Americans are saving more money now than at any time since February 1995, The Wall Street Journal reports.
According to the Commerce Department, personal saving rose to 5.7% of after-tax income in April. That's up from 4.5% in March. A year ago, the savings rate was a big fat zero. President Obama's stimulus package helped, as it started adding a few more dollars in most Americans' weekly paychecks.
This switch to saving would make your mother proud. But is increased saving actually a good thing? More spending is what will help jump-start the economy, and all this saving -- while good for personal bank accounts -- could be getting in the way of a recovery.
Obama has been encouraging Americans to live within their means. So how does he square that with economic growth that might be sacrificed in the process?
Treasury Secretary Tim Geithner says the U.S. economy needs to start looking elsewhere for support. We're too reliant on consumer spending to get the economy going.
"The purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past," he said in a speech in China, according to the Journal.
Keep in mind that the credit markets have a direct impact on the savings rate as well. More credit means more spending and less saving. The credit markets have dried up, and more saving is a natural result of that.
Image credit: Corbis
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