Do Americans save enough? Is the savings rate of Americans dropping to the point where the economy could suffer as a result? What is the relationship between overall savings and a country's prosperity? The issue of savings in America has received a considerable amount of media attention in recent years as the country adjusts to lagging behind many other industrialized nations in its rate of savings. At the same time, the federal deficit has grown significantly, and increasingly large numbers of citizens are wondering if there will be a Social Security system for their retirement, which is one of the primary reasons that people save. This research considers the savings rate of Americans and evaluates the ramifications that the rate of savings has on the economy as a whole.
Americans have saved less in recent years than in the 1950s and 1960s; in 1994, the rate was approximately six percent, compared to an average of nine percent during the 1960s and 1970s. Net business saving has increased in the past few years, but the personal saving rate is at its lowest point in nearly 50 years (Greenspan, 1995, p. 259).
The reasons that Americans are saving less are many, and hotly debated. Some of the reasons are cultural: Americans are interested in improving their personal standard of living, and are increasingly purchasing items which are bought on credit. This requires greater outlays of cash on a monthly basis than previous generations faced, with the result that there is less money left over for savings. Another cultural factor is the increasing number of two-income families. Although at first glance, this would seem to encourage savings, since both parents are earning wages, in fact, it has brought about changes in lifestyle that may make increased savings difficult. There has been an upturn in convenience foods, purchased outside the home, rather than in home cooking, which is less expensive. Day care costs and the costs...