Consumer Savings Accounts Dropping
October 30, 2007
The last time American consumer savings dropped in negative ground and stayed there for a full year was during the Great Depression of 1932-33. Until now.
A report published by the Department of Commerce states that the rate of savings for the year 2006 was at a negative 1 percent. That is more than double the savings drop during 2005 which stood at about .4 percent.
If you are not sure what a negative savings rate means in real life, it can be explained like this: Consumers are spending their savings and selling off assets in order to pay for new purchases or to pay on bills. In other words, their net take home pay from jobs is not enough to cover all of their costs.
This should not come as a surprise to those who have been watching the overall economy and the spending trends of consumers in general. The truth is many consumers simply do not save as much, if at all, as they should. They are accustomed to living from payday to payday and there is nothing left to put into a saving’s account.
Other consumers have put money into their savings but are now finding that higher interest rates and credit card payments have maxed out their take home pay’s ability to keep up with the payments.
Still others have actually lost value in their savings as income properties may have lost market value or as stock portfolios become weakened by lower valued stocks and bonds. Regardless of the cause, Americans are not saving as they should be