Saving Versus Spending, American-Style
Posted by Richard on June 3, 2021
When times are tough, people are more likely to save or at least spend less.
In 1944, during World War II, the personal savings rate — defined as the ratio of personal savings in the country to disposable personal income — was about 25.5 percent, according to the Mercatus Center at George Mason University. Compare that to the low point of personal savings for Americans in July 2005, when Americans saved a comparatively measly 2.2 percent of their income, according to the United States Bureau of Economic Analysis.
After the recession in 2007, savings rates crept up to 7 percent in 2010.
Personal savings skyrocketed during the COVID-19 pandemic, when Americans had less to do and fewer places to go, according to NextAdvisor. In the first month after the March 2020 lock-down, savings soared to 33 percent, but then dipped to about 13 percent the next month, where it has remained with some ups and downs.
The way people spend money has also changed.
One big area: housing costs. According to CNBC, the median home value in 1940 was about $30,600, in today’s dollars. The median home value in 2020 was $280,000. The average home size has gone up, too, from 983 square feet in 1950 to 2,480 square feet in 2011, according to the Guardian. So while homes are much more expensive than they used to be, Americans also want almost triple the space.
We fill those bigger houses with stuff, too. According to Forbes, we consume twice as many material goods today as 50 years ago. The Bureau of Economic Analysis found that in 2017, Americans spent twice as much on consumer goods like jewelry, watches, books, luggage, telephones and related communications equipment, as we did in 2002.
The psychology of buying is simple. We buy stuff because it’s available and it feels good, according to Psychology Today.