Saving for a “rainy day” (Photo by John P. Flannery)

A recent poll said that 40% of our friends and neighbors have made their New Year’s resolution – to save more – in savings accounts, automatic transfers, savings bonds, and certificates of deposit.

We once did save at a decent rate.  Our national saving rate was 12.2% in November 1981.  But the rate fell like a stone starting in 1982 and went as low as less than 1% a number of times between 2000 and 2010.  Easy credit meant you didn’t have to save – so some wrongly thought.

The rate climbed back up when the 2008 recession hit, going from 1.3% in January 2008 to 4.2% in December of 2009.

The latest report from the U.S. Department of Commerce, from the Bureau of Economic Analysis, says our current rate of savings is an anemic 4.2%.

The dilemma for families that want to save is that they likely owe in debt at a higher interest rate than what they can get saving their money.  From 1990 to 2008, the nation’s citizens were convinced, Benjamin Franklin’s advice to the contrary notwithstanding, that being a borrower was not so bad.  Unfortunately, if a nation’s citizens don’t save, then the nation has to borrow from other nation-states who do save. Continue reading →