Why are Americans Still Saving So Much of Their Income?

February 19, 2020

After the financial crisis, Americans started saving more. Now, 11 years into the current economic expansion, they are still saving. In the fourth quarter of 2019 Americans saved 7.7 percent of their income, which is more or less the average of the post-crisis saving average. Before the crisis, Americans were only saving about 4 percent of their income.

Economists at Goldman Sachs examined the issue. They found that, as one would expect, the average is pulled up by wealthier Americans. The top 20 percent of earners save 12 percent of their disposable income, but the Goldman researchers say this accounts for just 0.5 percent of the savings average. The top 60-80 percent have also boosted their savings in recent years. Furthermore, the lower two-thirds, who historically drag down the average, are not falling into the “negative savings” rate they historically have.

Goldman’s team concludes that the primary reason is tightened lending standards. Reduced access to easy borrowing has caused an increase in saving. Goldman predicts that the average savings rate will fall by 2 percentage points over the next two years. This could mean good things for the economy, as consumers spend more and save less.

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