Saving and Investment

Wealth Increases, Saving Rate Falls

Two sets of figures out on U.S. personal savings rates seem to differ with each other. But economists believe they have an explanation.

  • Government figures show that the net worth -- including savings -- of the 100 million U.S. households jumped about 10 percent last year to $32.9 trillion.

  • But the government reported on Monday that the U.S. personal savings rate in 1997 fell to 3.8 percent -- the lowest in 58 years.

  • The explanation is that the savings rate does not include accumulated savings, only how much aftertax income is left after household bills are paid -- a flow of money, rather than an accumulation of funds.

  • The 3.8 percent savings rate for last year compares to a 10 percent rate in 1980 -- no doubt, to some extent, a reflection of the impact of higher taxes on families.

Between $15 billion and $20 billion a month has been flowing into stock funds the past three years and nearly 50 percent of all U.S. workers contribute an average 5 percent of their gross income to 401(k) plans.

A Federal Reserve measure of savings -- one that includes both debt and assets such as homeowner equity -- reveals that U.S. households saved at an annual rate of 6.8 percent of aftertax income during the third quarter of 1997. That figure still trails Japan's 11.9 percent and Germany's 11.5 percent.

Source: Beth Belton, "Household Savings Draw Mixed Data," USA Today, February 4, 1998.

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