NR Digital

Raising Saving

by Allison Schrager
The alternative is a much larger entitlement state

Americans don’t save enough. In 1960, the personal-saving rate — the share of people’s after-tax income that they save — was 11 percent. By 2007, it was under 3 percent. Saving rebounded following the recession, but not by much: In August 2013, the saving rate was just 4.6 percent. A 2009 survey conducted by market-research firm TNS found that nearly half of Americans don’t believe they could come up with $2,000 in 30 days if they had to.

This is a big problem, because a low-saving economy experiences less stability and growth, and a low-saving society is less resilient. When households have more debt, recessions are worse and it takes more time to recover. Debt-plagued recessions are inevitable in a low-saving economy: People who have no financial cushion must take on debt to finance any economic setback.