Bravo! The current economic recession has inspired us to save more of our paychecks—6.9 percent of our after-tax income in May.
Can we do better? Absolutely. According to the Bureau of Economic Analysis, Americans’ personal savings rate peaked in May of 1975 at 14.6 percent.
The current savings rate is about equal to the 50-year average, which has been dragged down by extravagant spending (and prodigious use of consumer credit) over the last few decades. A few years ago, the savings rate actually turned negative, indicating that Americans were spending more than they were earning.
If the recession has a silver lining, it’s that we’re getting back on the right track with regards to saving. More and more people are realizing that achieving financial stability is far more important than purchasing material goods.
So here’s a call out to all you frugillionaires: let’s strive for a record personal savings rate of 15 percent! (If they could do it in the 70s, we can certainly do it now!)
Let’s take 15 percent of our paychecks, put it in the bank, then go about our business as if the money was never there. Those dollars will never see the inside of a mall, restaurant, electronics shop or department store; they won’t be wasted on miscellaneous doo-dads we’ll grow tired of next month; and they won’t line the coffers of giant corporations, or pay the bonuses of greedy CEOs.
On the contrary, those dollars will work for us: paying down our debt, building our wealth, and securing our financial futures.