Savings Account Rates and the Savings Rate

A recent article in the New York Times suggests that economists are puzzled as to why the nation's savings rate is dropping again after rising since the financial crisis and the "Great Recession". After the recession the nation's savings rate was over 5.00% but is now the rate is back down to 3.6% which is the lowest level since the recession.

The article suggests people might be returning to their old habits of spending and saving less. One topic the article didn't cover was current savings rates. Rates on savings accounts are near historic lows. MonitorBankRates' current national average savings account rate is at 0.20%. The FDIC's National Rate Cap survey is even lower at 0.12%

What incentive do consumers have to save with rates that low? Well they don't have an incentive to save. Yes you can find savings account rates higher than the averages but even the highest savings account rates are just above 1.00% and the best 1 year CD rates aren't much higher at around 1.15%.

Treasury yields are even more pathetic than savings rates. The current yield on 1 year bonds is at 0.12%. The same interest rate as the FDIC's national average savings rate.

Another factor that is causing the nation's savings rate to fall again is people are hurting and probably dipping into savings to get by. Retirees that rely solely on interest income (besides Social Security) probably have to dip into savings as well to get by. 

I personally believe the nation's savings rate will continue to decline until savings account rates start moving higher again and that won't happen until the economy recovers and inflation is a concern.