In times of crisis, Americans put their money away
Wartime savings, circa 2030?
Contrary to what many think, U.S. workers set the standard for personal savings not during the bust of the Great Depression, but rather in the war that followed as patriotic Americans snapped up savings bonds and tightened their belts.
When the war against coronavirus fades into a period of pandemic posttraumatic stress, will the United States set a new standard for saving? If history is any indication, it will — either way, personal spending decisions will matter, both in the speed of the recovery and also for long-term fiscal stability.
At times of uncertainty, Americans save. After the financial panic of 2008, the rate of personal savings climbed five straight years through 2012, peaking at 8.8 percent of disposable income. That was only seven years after the savings rate bottomed out at 3.2 percent, the lowest mark in decades.
During World War II, the savings rate shot past the 25 percent mark, then after a post-war lull climbed back above 10 percent and stayed there for a mostly unbroken string through 1984.
U.S. households remain well behind other industrialized nations when it comes to the accumulation of financial assets, as tracked by the Organization for Economic Cooperation and Development.
Will the hard times of 2020 set up a record run of savings?, perhaps pushing people back to the days of socking away at least 10 cents of every dollar?
“This has been so traumatizing — we know that a lot of households had very little savings anyway,” said Fred Carstensen, an economist with the University of Connecticut. “It is going to be, ‘I am going to avoid every discretionary item I can.’
“There’s no question in my mind that there will be a fundamental change in consumption patterns.” said Fred Carstensen, an economist with the University of Connecticut.