The Wall Street Journal reported this weekend that the personal saving rate was 6.9% in May, which is the highest it’s been since 1993.
One would think this is a good thing. But, in a consumer-driven economy such as ours, saving money is a bad thingat least in the short run because savings represents money that could be used to stimulate the economy.
The personal savings rate can be defined as…
From what I can tell from my reading, consumption is the amount spent on autos, other durables, nondurables, and services. That means that 401(k) contributions must be a part of the personal savings rate. Call me crazy but 6.9% seems like a fairly low number for personal savings if it includes retirement savings.
My family is saving way more than 6.9% of our household income (including retirement plan contributions). What about your family? Has the current economic situation inspired you to save more?
NOTE: If I’m wrong here, please enlighten me. I think I might have slept through some of my economics courses in college.