Mar 05, 2009

The saving lifestyle

Posted by: Marian Salzman In: credit crisis| millennials| recession

When a few influential people start doing something different, we have the makings of a trend. For example, when households started to forgo landlines and use only cell phones at home. Or when Millennials started watching “TV” on their laptops rather than their televisions. 

 

But when entire populations suddenly start doing something radically different, it’s a lot bigger than a trend. That’s what’s happening right now with American attitudes toward money. Pretty drastic changes have swept through the country since the economic crisis really took hold.  Even the term “megatrend,” coined by John Naisbitt in his 1982 bestseller, falls way short of describing how large-scale spending patterns have screeched to a halt, as people scurry to pay off their credit cards and stuff cash under the mattress.

 

It seems like yesterday that many of us were merrily spending more than we earned, funding the difference via home-equity loans or other sources of credit. Americans under 35 in particular were big non-savers; in 2006, for every $100 they earned, they spent about $117. But in 2008 this trend reversed sharply; the personal saving rate (the difference between what people earn and what they spend) went from 0.8% in August to 3.6% in December. Goldman Sachs has predicted the 2009 saving rate could shoot up between 6% and 10%—even the breadth of that range shows just how unpredictable things are. 

 

We’re training ourselves to resist impulse, and we think twice even when we’re buying necessities. While these seem like positive changes in personal attitudes and values, they also contribute to further devastation of the economy. What is the fallout when a whole national economy (let alone global economy) switches from spendthrift to thrifty? 

Viewing 1 Comment

 
close Reblog this comment
blog comments powered by Disqus