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July 11, 2009


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Those who have ramped up their saving are the ones who realized they weren't saving enough. I'm not one of those, so my saving is unchanged.

Interesting note: 7% more saving means a 7% (or so) decrease in economic activity.

We are saving more, but that mostly relates to a change in lifestyle for my fiancee and I. We moved overseas for work so we decided to get one place instead of having separate places as we did in the US. We were able to up our 401k contributions to max them out so combined we are saving about 6-7k more there, and we can live on one salary so the entire other salary is being saved for when we get back to the US (house down payment, cars, furniture for the house, etc.). One rental payment vs. 2 mortgages has made a big difference for us.

Like you, we are doing the same thing as before. We were savers before and haven't changed the rate at which we save.

Concojones: "Interesting note: 7% more saving means a 7% (or so) decrease in economic activity."

For a couple of years I was saving for a house, then last August I bought one. In what sense were my saving habits a decrease in economic activity? The money I was saving was being loaned out by the bank for others to use, no? And I spent it on something that employs people and utilizes resources.

Right now I'm saving for a car and for other things as well - same deal.

The only 'saved' money that decreases economic activity in a major way is money one stuffs under a mattress, and even then the question of how much of an activity decrease happens is a rather complicated matter.

To respond to the initial question - now that I'm paying a mortgage instead of saving for a house, I suppose I'm saving somewhat less. That said, before I purchased my home I was saving more per month than my mortgage payments ended up being, and I'm investing the difference now, so I haven't taken the opportunity to increase my disposable income.

I'm saving 30% of my take home pay. 25% of my take home pay goes to my Roth IRA and down payment on a house/condo, and the final 5% goes to a gifts/vacations/engagement rings fund.

Like the previous commenter, much of what I'm saving will be spent some day, so it hardly translates to a decrease in economic activity, assuming others have the same mindset.

I am saving more. I wasn't saving enough, so now I'm working on building a good emergency fund, as well as a vacation fund too.

Well, I'm still saving above 30% gross, but the truth is, I used to save more than this.

The reason why is because of a lot of "recession deals" that I finally decided to take advantage of. I have literally years of stuff that I've put off simply because I didn't want to pay the full price so to speak. Even now, there are some good deals out there.

For the "average American", if you will pardon the term, the recession has made them pull back in order to weather this financial storm. However, for people who I think are already frugal and wielding cash... it's still a buyer's market out there.

Not sure this is really a "we are saving more voluntarily as a whole" thing. More like those that were spending 10% more than they made (balancing out those saving 10% of what they made) finally ran out of credit. And there is nothing like bankruptcies, foreclosures, and being forced out of retirement back into the workforce to increase the "savings" rate.

Question, whats does it mean when people say "we're saving almost 7%"? Does it mean that 7% of people are saving money? Or that overall people now save 7% of their income?

We save 51% percent of our after tax income. This is our normal savings plan and not related to recession.

Not a surprise at all. I even find myself being a lot more careful when I spend. I basically don't spend unless I really, really need to. I think this is the case with most people these days.

Dang Right am saving more now. 401k and S.S. will allow me a nice 'new-used'
traveltrailer to live in. The cash will be for the fuel to haul to W-mart to park and work.

@MattJ: you're right, it's more complicated than I thought. To have an idea of long-term economic consequences, we'd need to know what the saved money will eventually be spent on (homes? stocks? travel?).

@Lynn: 7% of one's gross income

I save about 25% of my income. I have always been a pretty good saver, but have definitely gotten better over the past few years. Thanks,

I'm currently saving 40% of my after-tax income, for my eventual retirement and for my kids' college 8 yrs from now. Should go up in a few years due to decreasing child care costs as my kids get older.

My savings in 2009 are a significant increase compared to the previous few years due to my life circumstances. I got divorced a few years ago (v expensive legal fees) and then I had to buy a car and take care of deferred maintenance on my otherwise inexpensive home (siding, roof etc). I had almost no savings back then due to my ex disappearing with everything, but I managed to cover the cost of everything without taking out loans. I was always planning to ramp up my savings in 2009--the economic crash was just a coincidence. I guess you could say I had my own personal economic crash a few years prior!

The saving is going pretty well so far, but my plan to save money by mowing my lawn myself this year hasn't worked out very well. The Epic/Solaris electric lawn mower I bought this Spring was a total fail. Impractical at best due to extremely low battery power time (only 20 actual min instead of the advertised 45 min), and then it developed some kind of short and just stopped working altogether. Do not buy one unless you have only about 30 sq ft of lawn and enjoy repairing badly-made equipment! I just bought another (gas-powered this time) mower to make it through the summer--I hope this one lasts for a couple of years at least.

We are saving more due to debt reduction. (Thank you Dave Ramsey). We've eliminated a car payment, $400.00, a land payment $875.00, and unneeded insurance $105.00. This is being saved on top of the $275.00 we saved before DR plan. We still have money to help stimulate the economy...


It's my understanding that we can also get the same economic output with less money available if you can manage to increase the velocity of money:

So you can stick your money in your mattress and, so long as the remaining money in the economy works harder, economic output can stay the same. If you think about it, if everyone with money refused to lend it out, and I wanted to borrow some, then I would have to keep offering to pay higher and higher interest rates until I found someone willing to loan me their cash.

I believe that access to easy credit goes hand-in-hand with an increase in the velocity of money. In fact, the recent attempts by the government to inject capital into the economy are an attempt to get money moving again - that is, to free up credit.

(Any economist readers feel free to correct me - I know very little about this subject)

@MattJ: now that you mention velocity; more saving means a lower overall velocity. It's what typically happens in a recession, I think (1).

Velocity and money supply are very similar concepts, in the sense that increased velocity is like having a larger money supply. Making access to credit easier is something I'd catalog under increasing the money supply (2).

If you put (1) and (2) together, you can see the risk of inflation ahead. Once the economy (velocity) picks up again, and there's lots of credit around (how to judge that? at what point do the Fed's recent actions more than offset the credit contraction of last Fall?), that's like a massive increase of money around (for the same goods) and the result is inflation.

7% savings rate can be attributed to a combination of the following:

1. Fear over recession.
2. Reduced access to credit.
3. Government stimulus & handouts.
4. More informed or responsible financial behavior.

1. The recession will eventually end, and unless this turns into the Great Depression II, once its been over and it's affects are mostly behind us, most of #1 will go away.

2. Once #1 goes away, #2 will mostly go away too. It's already loosening a bit. This is a significant contributor too because the reason car sales are down from 15 million units to 10 million and not just down to 14 million is almost entirely because of a lack of credit. Many dealers had said early on in the auto crisis that they have plenty of would be buyers but when they sit down to do a deal they can't get financing. And now most of those people have realized they can't get the money so they just quit trying for the time being.

3. After #1 and #2 are gone #3 will surely be gone. It might have to be gone sooner if the politicians ever want to get responsible and stop spending us into burdensome debt. And currently all that extra money they are giving us in our paychecks and injecting into other pork projects filter through the economy and allow people to still spend money while saving money because they just have more of it so by spending the same amount they are saving more. Hardly proof of any so called increase in savings activity.

4. So that will leave us only with #4. Anyone want to guess what miniscule percent of the savings increase is due to #4. I don't think my calculator can calculate numbers that small.

Definitely, yes. I save a massive (for me) amount each month. About $1K for a house, and about $1K for retirement.

How are you people saving 30+% of your income?! That's incredible. Are you single or empty nesters? I have a house, 3 kids and a wife plus I tithe 10% of my income to the church. To save 30-40% seems impossible unless you have a high income or low cost of living.

Texashaze --

First of all, most people don't tithe/give much, so that's where they get 10% to start. After that, it's a combination of keeping expenses low and income high.

FMF - good point. Between our tithing and saving 10% that equals 20%. I guess one could squeeze out another 10+% to get the 30. Unfortunately we splurge that extra 10% for more life experiences plus the extra we pay on our 15 year mortgage.

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