Saving and Investment

U.S. Savings Rate Climbs

After declining in the 1980s and in 1993 and 1994, the rate of savings among Americans is increasing once again, according to the Commerce Department.

  • At the end of 1996, personal savings represented 4.9 percent of disposable income -- up from 3.8 percent two years earlier.

  • That is still well below the nearly 6 percent rate of the early 1990s and the 8 percent to 9 percent rate of the early 1980s.

  • Overall, personal savings totaled $274 billion at the end of last year -- an increase of 44 percent from three years earlier.

  • Meanwhile, consumer spending has been relatively subdued -- rising at an average annual rate of only 2.7 percent over the past five years.

DRI/McGraw-Hill economists estimate that the increase in personal savings has held down interest rates by as much as half a percentage point. That has helped spur business investment, which since 1992 has grown at an average annual rate of about 7 percent.

According another analysis, the high interest rates hold inflation in check. "If the savings rate had not gone up, the economy would be bulging at the seams," according to Donald Ratajczak, director of the economic forecasting center at Georgia State.

Economists attribute the recent increase in savings to baby boomers who, worried about retirement, have been pouring funds into stocks, mutual funds and other instruments.

According to America's Research Group:

  • More than 50 percent of people in their 40s and 50s are trying to increase their savings.

  • That compares with only 25 percent of this group ten years ago.

Some economists believe the savings rate could reach 8 percent early in the next decade, because most baby boomers have yet to reach their peak savings period.

Source: Robert Berner, "Personal Savings Continue Steady Climb," Wall Street Journal, March 24, 1997.

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