Personal Savings Rate
Personal saving as percentage of disposable income
“Americans stopped saving after 1971 because inflation ate their purchasing power.”
The savings rate declined from ~12% in the early 1970s to ~3% by 2005, then spiked during COVID. The decline tracks with credit card adoption, financial product availability, consumer culture, and the shift from defined-benefit pensions to 401(k)s.
Perspectives
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Multiple forces reduced saving — credit, wealth effects, and culture
The savings rate decline reflects credit access, perceived wealth from assets, the pension-to-401(k) shift, and stagnating wages — with monetary policy as a contributing factor.
There's a genuine connection between easy money and the savings decline: low interest rates make saving less rewarding and borrowing cheaper. But the decline was gradual and driven by identifiable non-monetary factors. The COVID savings spike showed Americans can save when conditions warrant it.
Causal Factors
Credit expansion & consumer finance
30%Credit cards, auto loans, and buy-now-pay-later made consumption possible without saving first. US credit card debt exceeds $1 trillion.
Wealth effect from housing & stocks
25%Rising home values and stock portfolios made Americans feel wealthier, reducing the perceived need to save from income.
Shift from pensions to 401(k)s
20%Defined-benefit pensions (employer-managed) were replaced by 401(k)s (individual-managed), and many workers don't contribute enough.
Stagnating real wages
15%With real wages flat for many workers, there's less room to save after covering rising costs of housing, healthcare, and education.
Consumer culture & marketing
10%Advertising expenditure and consumer culture shifted norms from thrift toward consumption.
Data Source
Key Events
Nixon Shock
Gold standard ends — savings rate was actually near its PEAK
401(k) created
Revenue Act of 1978 creates the 401(k), shifting retirement from pensions to individual savings
Credit card boom
Supreme Court ruling in Marquette v. First of Omaha enables nationwide credit card lending
Pre-crisis low
Savings rate hits 2.6% as housing wealth effect reduces saving
COVID spike
Stimulus checks and lockdowns drive savings rate to 33% (April 2020)