Personal Savings Rate Falls to 4 Percent

The U.S. Department of Commerce's Bureau of Economic Analysis released a report showing the personal savings rate has fallen to 4.00 percent. Not to be confused with savings account rates offered by financial institutions, the personal savings rate is the rate in which Americans save money.

Looking at the chart of the personal savings rate below, the rate held steady in the 1960s and 1970s but has been trending lower since the 1980s. Over the past 50 years, the highest the personal savings rate was at 13.9 percent back in April of 1975, just after a severe recession. The lowest point ever was when the rate fell to 2.0 percent back in July of 2005.

The biggest factor driving the rate higher has usually been a recession but the personal savings rate has also increased when savings account rates moved higher. The recent post recession uptick happened right after the financial crisis and Great Recession. In August 2007, the personal savings rate was 2.7 percent but when the recession hit, the rate jumped to 8.00 percent.

The biggest reason the overall trend in the personal savings rate has fallen since the 1980s is that incomes have been stagnant. The following chart shows back in 1989, the median household made $51,681 (in current dollars). In 2012, the median household income was $51,017. This shows that the average middle class family was making slightly more money 25 years ago than they are today.

It's no wonder the savings rate is fallen, the average middle class American family has no money to save. Not to mention, with such dismal savings rates, there is practically no incentive to save. The best savings rates right now are just below 1.00 percent, which is lower than the current rate of inflation. Interest rates will be moving higher in the coming years but higher rates won't help the average middle class family.