People save for various reasons. Some save with a specific purchase in mind, such as cosmetic surgery or a Porsche, while others save just to have more money. Economists say that individuals save to buy durable goods and/or accumulate wealth to maintain a certain lifestyle during retirement or in times of financial uncertainty. These reasons all confer benefits to a saver. In the near term, the saver can finally buy the latest and greatest gadget, and in the long term, the saver can be more financially secure during retirement or unplanned unemployment.
Normally, personal saving declines during recessions because people want to maintain their existing level of consumption. During the Great Recession, though, saving increased. The chart shows the personal saving rate, the year-over-year growth rate of gross domestic product
(GDP), and recession periods from 2000 to 2011. Before the Great Recession, the average saving rate for the typical American household was 2.9 percent. Since the recession started in
2007, the average saving rate has risen to 5.0 percent. This increase was largely driven by uncer-
Wait, Is Saving Good or Bad? The Paradox of Thrift
E. Katarina Vermann, Research Associate
“[Saving] is a paradox because in kindergarten we are all taught that thrift is always a good thing.”1
—Paul A. Samuelson, first American to win the Nobel Prize in Economics (1970)
ECONOMICS
NEWSLETTER the back story on front page economics
May
You May Also Find These Documents Helpful
-
end of 2006 to 11 percent by the end of 2008. Morgan Stanley reported that, in…
- 1377 Words
- 6 Pages
Better Essays -
In this article, U.S. Saving and Investment: Forty Years of Decline by Alan Cole he explains the value in saving and investing as a nation. He explains that savings has a long lasting value for the future rather than just spending it all right away. In investing he also explains, it is that save income spent in purchasing buildings and/or machinery to produce goods, which will result in an income return in the future. Also, he describes that America has become less dedicated in saving and investing over the past forty years.…
- 629 Words
- 3 Pages
Good Essays -
Saving may be important to a household for Biblical and retirement reasons, but also because it affects the savings of the economy (Feldstein, 2008). According to Feldstein, national saving is the aggregate of household saving and corporate savings minus any national deficit (2008). Corporate retained earnings have been high but…
- 797 Words
- 4 Pages
Better Essays -
Basics: age & income & specific responsibilities in life matter in the mix of assets in one’s portfolio.…
- 866 Words
- 4 Pages
Good Essays -
Daniel Akst, in his essay “Saving Yourself”, discusses the need for thrift during the U.S. economic recession. According to Ackst economist Thorstein Veblen developed the theory of conspicuous consumption while economist Simon Patten promoted consumer spending and capitalism as tools of social change. Thrift declined following World War II and the Great Depression due to the promotion of spending as a way of strengthening the U.S. economy. Akst discusses how purchasing second-hand items may be necessary due to economic problems. Akst gives a very informative, descriptive, and detailed article about the spending habits of people. He gives the impression that he really researched this topic. I felt that Akst brings up several good points and is very persuasive.…
- 894 Words
- 4 Pages
Satisfactory Essays -
We can still make a difference in the lives of others. As Keri Wyatt Kent said in her book “Simple Compassion,” that to make a difference in our country we need to cut back on our spending. Reasonably, I discover that Americans are frugal based on the followings. First, the presidents’ examples of frugality are to clear our hearts. Secondly, most Americans were the immigrants for the sake of adapting their lives to a new land, they lived the frugal lives. Lastly, the Americans are compassionate, and their sense of generosity reflects the frugal trait. Therefore, frugality is a part of the philosophy of the Americans that we in this country hold dear.…
- 542 Words
- 3 Pages
Good Essays -
- Some of the ways that you could save more money is to cut back on certain things that you’re paying for that you don’t really need.…
- 593 Words
- 3 Pages
Satisfactory Essays -
There are two important decisions we have to make: what do I keep and what do I throw out? Schutza tells how the inability to throw out, due to the emotional attachment, is extremely hard for hoarders (Schutza 254). Dr. Randy O. Frost and his colleague RC Gross supports her as he defines hoarding as the acquisition of and failure to discard large numbers of possessions, which appear to be useless or of limited value (Frost & Gross 367-381). While hoarding is widely frowned upon, everyone, whether consciously or not, partakes of hoarding habits. Asking the question “Do we really need everything we buy and save?” she implies that we have enough, if not too much, when she explains how there was one time when only the wealthy used to be able to afford materialistic nonessentials but now that food and material are sufficient; we have just developed problems of greed (Schutza 256). Frost, Steketee, and Williams defined compulsive buying as chronic, repetitive purchasing behavior, in response to negative events and/or feelings, that is difficult to stop and…
- 1113 Words
- 5 Pages
Good Essays -
Children of post war America at the more senior end of their era feel preferable about their accounts over do those at the more youthful close. The rate of Americans who concur that they have "all that anyone could need cash to would what you like to do" climbs over the time of increased birth rates years of 49 to 67 and presses on to expand as mature people move into their 80s - proposing no pending period of expanded budgetary angst as the enormous person born soon after the war era moves into retirement age.Americans come to be more inclined to say they are "feeling really great nowadays about the measure of cash" they need to use as they enter their 50s. More youthful Americans are truly just about as positive as those of more seasoned ages on this metric, yet state of mind intensify around Americans in their late 40s, preceding enhancing once more.…
- 255 Words
- 2 Pages
Satisfactory Essays -
Some benefits that are most appealing to me is having greater financial success, independence, flexibility, and challenge because with all of them combined, it’s beneficial to me and can help me gain more money easier.…
- 2023 Words
- 7 Pages
Powerful Essays -
Firstly, improvement in technology which started from the industrial revolution plays a major role in the decrease in saving today because it help promote the rise in labor productivity motivating consumers to move into their personal saving to satisfy their desire, in some event, if the cash is not available for purchase, they prefer using their credit cards which will reduce their saving after a particular time frame. The personal income of consumers reduces every per day because the amount of credit scores by consumers on goods and services creates a situation they may be unable to save.…
- 565 Words
- 3 Pages
Satisfactory Essays -
expenditures in the United States have risen 6.5 percent per year since 2000, and 5.5 percent per…
- 1372 Words
- 6 Pages
Powerful Essays -
A person should consider to buy the things that they need instead of what they want. There is a lot of famous people that has several exotic cars but somehow lives a miserable life. A person with one car will live better than the person with two or more. In today’s society, materialistic thing cause less happiness than people who are less…
- 457 Words
- 2 Pages
Good Essays -
Some people live life like it is their last day alive, spending everything. Some other people save every penny they own. Which way of life produces a better life? What should people do with their money? In the fable, “The Ant and the Grasshopper” and the modern fable, “The Richer, the Poorer,” the main characters reflect two opposite views of how to live life.…
- 452 Words
- 2 Pages
Good Essays -
* Increasing pressure of inflation lead to higher interest rate. (Interest Rate cycle turned around middle of 2007)…
- 2678 Words
- 11 Pages
Powerful Essays