Personal Income, Outlays and Current Savings Rates in the United States

Personal income and disposable income were both higher in the month of September but very low savings rates caused the personal savings rate to decline in the month of September. Personal income increased $48.1 billion, or 0.4 percent, and disposable personal income (DPI) increased $43.0 billion, or 0.4 percent, in September, according to the Bureau of Economic Analysis.

"Personal saving," which is calculated by subtracting personal outlays from disposable personal income, was $395.0 billion in September, compared with $445.1 billion in August.  The "personal saving rate," which is calculated as personal saving as a percentage of disposable personal income, was 3.3 percent in September, down from August's rate of 3.7 percent.

The continued declines in personal savings is no surprise since savings account rates are so low these days. Right now the best savings rates available are just above 1.00 percent, not much of an incentive for anyone to save money in a savings account. The average savings rates are much lower than the best rates available. In this week's National Rate and Rate Cap survey released by the Federal Deposit Insurance Corporation (FDIC), the average bank savings rate is at 0.08 percent. Average jumbo savings account rates are just as low, also averaging 0.08 percent this week.

The highest savings account rates right now on our national rate survey are at 1.04 percent with an APY of 1.05 percent. The highest money market rates on our list are also at 1.04 percent with an APY of 1.05 percent. Just a few years ago you could find banks offering savings rates and money market rates above 3.00 percent. Now you can't find a bank offering rates much higher than 1 percent.

With rates so low, there is no incentive to save these days. The current personal savings rate hit a multi-year high during the financial crisis as people were scared to spend money and saved money just in case they lost their job. Now that the economy is recovering, people are more inclined to spend instead of save, causing the personal saving rate to decline.

The near future direction of both savings rates and the personal saving rate are expected to decline as the Federal Reserve will continue their current policy of keeping the Fed funds rate at near zero percent until mid-2015. As a result of a low savings rate, the personal saving rate will also decline from the current rate of 3.3 percent.