FACTS ON POLICY: U.S. Savings Rate

October 10, 2006

In 2005, the U.S. savings rate hit negative levels for the first time since the Great Depression.

• In 2004, only 8.7 percent of families did not have a savings, checking, or similar account, down from 14.9 percent in 1989.
• In 2004, 56.1 percent of surveyed families reported saving. Retirement and liquidity were the top two reasons those families gave for saving.

• The annual saving rate, defined as the ratio of personal savings to disposable income over a one-year period, hovered close to 10 percent between 1970 and the mid-1980s; it steadily declined during the 1990s.  Between 1999 and 2004, the savings rate has averaged around 2 percent, until it became negative in 2005.
• The saving rate was the highest in 1944, 26.1 percent.

• In 2004, the median value of financial assets of surveyed families was $23,000.  This shows a roughly $7,000 decrease (in 2004 dollars) from 2001 levels.
• Stocks and retirement accounts combined made up half of those families’ financial assets.

Figure 1
Personal Saving as a Percentage of Disposable Income (1970-2005)

Sources:

• Bureau of Economic Analysis, "National Income and Product Accounts (NIPA) Table, Table 2.1: Income and Its Disposition."

• Federal Reserve Board, Federal Reserve Bulletin, "Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances" (March 2006).
  
  *The various types of assets are defined on this page.

Related Links and Material:

• Maria Perozek and Marshall B. Reinsdorf, “Alternative Measures of Personal Saving” (April 2002).
  A discussion on the different ways to measure savings and the limitations of the NIPA definition of income and savings.

• Kevin Lansing, FRBSF Economic Letter Number 2005-30, “Spendthrift Nation.” A senior economist at the Federal Reserve Board discusses implications of the negative savings rate in 2005.

• Federal Reserve Bank of San Francisco, commentary on how to interpret low savings numbers and other useful references.

Quiz Source Information:

• Federal Reserve Board, Federal Reserve Bulletin, "Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances" (March 2006).