The one positive aspect of the credit crunch is savings rates are starting to rise. People have been cutting back on discretionary spending and all other types of spending.
The personal savings rate rose to 3.6% of after tax income from 2.8% in November. Some economists say the savings rate can reach the double digits by the end of the year. As recently as third quarter of 2005 in the height of the housing bubble the U.S. personal savings rate was negative.
Now if we can only get a decent yield on a savings account or a certificate of deposit, but that won’t come until the economy picks up and the Federal Reserve raises the Fed Funds rate, which is currently targeted in the 0% to .25% range.
chart source: U.S. Bureau of Ecomonic Analysis
Related link: Reduce debt
Author: Robert Till
February 3rd, 2009
