Consumer confidence and spending in the United States rose in the month of March at a time when budgets are tight and the economy remains fragile. Despite this somewhat positive economic data, the savings rate still remains quite low.
According to the Bureau of Economic Analysis, earning and spending increased during February; personal income jumped 1.1 percent, or $143.2 billion, and disposable income boosted 1.1 percent, $127.8 billion.
Although the savings rate did rise to 2.6 percent, up from 2.2 percent in January, it is still down from four percent from last year. It should be noted that four percent is still considered pretty low, especially considering that the traditional method of saving is at least 10 percent of your income.
“The majority of Americans are woefully under-saved for both emergencies and retirement and they know it,” said Greg McBride, a senior financial analyst at Bankrate.com, a personal-finance research and publishing company, in an interview with the Wall Street Journal. “Only one in four Americans has an adequate savings account to cover six months of expenses.”
The savings rate in the U.S. was at 12 percent throughout the 1970s and 1980s, but dipped all the way down to one percent between the years 2001 and 2005. It hit 6.4 percent last December, but it was considered a “fluke” because companies gave out bonuses and dividends were brought forward to the end of the year.