Americans Saving More, Is That Good Or Bad?

According to a recent report by the Commerce Department (and reported by the Wall Street Journal), Americans are saving more of their incomes than they have since 2006.   Analysts are uncertain of just how long this trend will continue.

The Findings

According to a recent report by the Commerce Department (and reported by the Wall Street Journal), Americans are saving more of their incomes than they have since 2006.   Analysts are uncertain of just how long this trend will continue.

The Findings

A study released just after the holidays found Americans saving approximately 5.8% of their disposable income. More recently, that number adjusted downward to 4.6%. The savings equated to about $768.6 billion dollars landing in American savings accounts (as opposed spending). The downward trend has some wondering whether the saving is about to end.

The elevated levels of saving are a mixed blessing. On the one hand, it is a good sign for American financial responsibility. Most personal finance experts recommend saving more as a means of improving one’s overall financial health and wealth. The saving shows that Americans are more cautious and want to be ready for a rainy day like the ones that followed the 2007 Great Recession.

However, on the other hand, the trend for saving is also problematic for economic stimulation. Consumer spending is an important element of overall economic growth. When more people sock away their money in savings accounts, less money is flowing through the economy, creating fewer jobs, and salaries stagnate.

What It All Means

The findings suggest more Americans have taken a cautious approach to spending following the slow recovery of the economy after the Great Recession of 2007. The start and stop spurts of economic recovery have left many nervous about the nation’s long term financial health. But, the slight downward trend in savings could reveal that those icy sentiments about the economy may be thawing.

That equates to solid growth in personal spending and correlates directly to the last quarter of 2014 that saw the highest levels of consumer spending since 2006.

Is American Saving / Spending a Trend To Watch?

While these numbers may be exciting or concerning from different perspectives, financial experts warn it may be too soon to call whether these findings equate to a long-term trend. The economy has bounced back since 2007, but it has done so in an uneven manner quite unlike prior periods of recovery.

As such, economists are just as cautious to call the savings/spending trend positive or negative for the economy, as consumers have been to let go of their precious savings.