Friday, August 05, 2005

Down, down, down (Savings rate)

From the Christian Science Monitor via YahooNews:

Americans have stopped saving for a rainy day. Instead, they are living paycheck to paycheck, depending on credit cards to get them through emergencies, and hoping that the rising value of their homes will give them a retirement nest egg.

This personal economic chasm is showing up in the national savings rate, which has been declining for years. Tuesday, the Commerce Department reported that the personal savings rate fell to zero in June, the lowest since a one-month buying binge in the aftermath of the 9/11 attacks.

I'm not a bit surprised, but I don't really take this to be a character flaw. The reason that past generations saved so much was because that was the only way to afford things like cars, major appliances, etc. With the ease of credit today, there is no incentive to save, other than the sense of security that it gives you. But people don't believe in that kind of security any more. No matter how much you save, it can all be wiped out by a major illness or similar catastrophe such as your kid going to a private university.


Anonymous Rich said...

So why do they have such a high savings rate in Japan and China, to a fault? I'm not arguing with you here, I really just don't understand what makes things different there.

Re: your last phrase--So I take it you're not pushing your kids Evanston-ward, Daryl?

12:01 AM  
Blogger Daryl McCullough said...

I don't know what makes the difference with China and Japan. In China's case, I think it really could be the lack of availability of credit for the typical Chinese worker.

As for Evanston---I would love to be able to bankrupt myself to send my kids to Northwestern. It's not looking like they are headed that way, though.

1:16 PM  

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