U.S. Savings Rate Hits Lowest Level Since Great Depression
For the first time since 1933, the U.S. personal savings rate has dropped into negative territory. Alarming economists nationwide, this troubling trend shows personal spending surpassing personal income for an entire year.
Freehold, NJ (PRWEB) February 8, 2006 -- For the first time since 1933, the U.S. personal savings rate has dropped into negative territory. Alarming economists nationwide, this troubling trend shows personal spending surpassing personal income for an entire year. And with baby boomers approaching retirement and young adults knee deep in dept, analysts caution that this risky behavior could put Americans in serious financial danger.
According to the Associated Press, the Commerce Department reported Monday that the U.S. savings rate has reached a low of minus 0.5 percent. Shockingly, this was the first time since the Great Depression (when it was negative 1.5 percent) that the government recorded the national savings rate dropping below zero.
With 78 million American’s on the verge of retirement, this news comes at an inopportune time. The average baby boomer will be eligible for social security within two years, and with an average personal savings reaching negative $67.5 billion, these pre-retirees could be facing tough times ahead.
To reverse this pattern, American’s must learn to save. With the help of Novadebt, a national non-profit social service agency dedicated to helping those in debt regain financial stability, consumers can now take positive, proactive steps to correct and improve their personal financial situation.
According to Diane Gray, Director of Education at Novadebt, “Americans are relying too heavily on the equity in their homes for long-term financial stability. The recent upsurge in home values has millions of Americans feeling as if they’re wealthier than ever before, and many have changed their saving and spending behaviors as a result. Too many Americans believe that the equity in their homes is all the savings they need, and have begun spending their disposable income instead of putting it away for the future. This disturbing pattern has resulted in an outrageous drop in the U.S. savings rate, declining steadily from 10.8 percent since 1984.”
At a time when interest rates are steadily increasing and home refinancing is at an all time high, the potential negative impacts of this trend are even more disturbing. As interest rates continue to rise, home values inevitably adjust downward, reducing the amount of equity that homeowners can count as savings. This is already evident in several housing markets, including the northeastern United States.
“Homeowners who have recently refinanced, trading in their fixed rate mortgages for ARMs or interest only products could be the hardest hit,” noted Gray. “These people could very well wake up one day and find themselves with less equity in their homes and much larger monthly payments to make on their mortgages. For those without any additional savings vehicles, the dangers are most dramatic”.
For more information call Novadebt toll-free at: 1-800-772-4557.
A certified credit counselor will work with you to determine a personal financial plan to help you regain financial stability.
Since its inception in 1991, Novadebt has helped over 250,000 people regain their financial footing and repay approximately $340 million to their creditors. A non-profit, social service agency licensed and bonded by the New Jersey Department of Banking, Novadebt is a member of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) and the Better Business Bureau. The United States Government recognizes Novadebt as a charitable organization under 501© (3) of the IRS Code. All of the agency’s counselors are certified by the Association for Financial Counseling and Planning Education.
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