It's a lesson plenty are heeding. People are saving more and spending less. The personal savings rate has risen to more than 4 percent after sinking to near zero in the months before last fall's meltdown. The number of people getting financial counseling is 3.2 million, double the amount two years ago.
In ways big and small — from scrutinizing their bills and joining credit unions to scaling back weddings and college plans — people are finding creative ways to deal with the worst recession in a generation. In short, there's a quiet revolution taking place in the way people save, borrow and spend that represents a retreat from old habits, and the first steps toward new ones.
SavingFor years, the traditional savings account has been a quaint relic of the past. There were just too many other things to do with our money, and most involved spending it. Home improvements — and, for many, a second home — a second car and then a third, overseas vacations. The list went on. Saving meant putting money in a 401(k), and many didn't put as much into those as they could. Then the market plunged and the value of those accounts fell with it.
Now, many people are reassessing their approach to socking money away.
While personal income is down slightly since the recession officially began in late 2007, the personal savings rate is rising. In 2007 the savings rate stood at 1.7 percent of after-tax income. That climbed to 2.7 percent in 2008, and in July — the most recent data available — hit 4.2 percent. As people fear losing their jobs, they will save more: Economists expect the savings rate to top 6 percent in coming months if unemployment — which was 9.7 percent in August — continues to rise.
But people are still saving less than they did in the last major recession, in 1982. Then, the savings rate was 10.9 percent when certificates of deposit were earning more than 12 percent.
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