It's a Sure Bet:
|Download Full Paper|
Americans today are working hard to get out of debt and to rebuild nest-eggs that have been depleted or lost in the Great Recession. More than six out of ten Americans say that they have cut back on household spending, according to a recent Pew survey. Half have reduced their mortgage, credit card and other consumer debt.
In addition to cutting spending, survey respondents are planning to save more in the future. Close to half (48 percent) say they plan to save more, once the economy recovers. An even higher percentage of younger adults — 68 percent — plan to boost their savings as conditions improve.
The renewed commitment to thrift is reflected in the savings rate. The rate — the share of income that is saved — dropped to l.7 percent in 2007, has since risen to 4 percent, a promising trend.
Still, it will take time and a sustained commitment to save in order to boost the savings rate into the ten percent territory achieved in the early 1980s. The road back to solvency will be especially challenging for lower-income families who have lost jobs and homes and who had limited assets and savings even before the Great Recession hit.
In the past, state governments played a key role in helping families of modest means to save. States chartered cooperative banks, buildings and loans, and credit unions to provide a safe and secure way for the "small saver," and especially for recent immigrants, women and minorities who were not served by other financial institutions. Public schools ran school savings banks to teach children how to save. State-wide campaigns during WW II encouraged parents to invest in U.S. savings bonds. These bonds matured in the post-war years and provided resources for families to buy houses, start businesses and send kids to college.