Personal savings rate

In the long term, the personal savings rate is projected to remain relatively low. Individuals tend to consume more and save less when they feel comfortable about their wealth and the expected future path of their incomes, which corresponds with periods when the stock market and housing markets are booming and gross labor income is increasing. In contrast, precautionary saving kicks in during recessions because individuals feel unsure about their wealth. The housing boom and stock market expansion between 2005 and 2007 spurred historically low rates near 3.0%. However, the 2008 financial crisis caused the personal savings rate to jump between 2009 and 2012, reaching a high of 7.9% in 2012. Moreover, lower levels of inflation and higher interest rates tend to spur savings activity; as a result, the personal savings rate was particularly high in the early 1980s.

Increased access to credit also contributes to a lower personal savings rate. Key interest rates like the prime rate and 30-year conventional mortgage rate have declined along with the personal savings rate in recent decades, resulting in a lower price of credit. As credit becomes easier to obtain, individuals tend to attach a lower priority to personal savings as a source of wealth to sustain future consumption. The low personal savings rate rates between 2005 and 2007 coincide with a surge in home equity loan popularity and a loosening of application standards for home loans. Lower income growth may also spur the need to finance expenditures with credit. A credit crunch followed the collapse of the housing market in 2008 and banks raised interest rates because they became wary of borrowers' ability to repay. Simultaneously, individuals shied away from borrowing because of fears about the economy; both factors helped drive the personal savings rate up between 2008 and 2012.

In 2013 and 2014, the personal savings rate remained around 6.0% as income growth did not coincide with a recovery of the labor market. The personal savings rate therefore did not decline because consumers maintained tempered expectations concerning economic growth and the labor market. Additionally, the rate increased in 2015 as increased interest rates incentivized an increase in personal savings. More recently, stable growth in the US economy led individuals to increasing their consumption, causing the personal savings rate to decline in 2016. Savings increased slightly over the next several years, but it hovered around a narrow band for much of the prior decade.

However, as the COVID-19 (coronavirus) pandemic hit global markets in March 2020, countries were forced to significantly curtail their economies to slow the spread of the virus. This led to many businesses being forced to close, with many individuals ordered to shelter at home and only exit for essential purposes. These restrictions, combined with massive fiscal support measures, led to an extremely rapid spike in the savings rate, peaking at 33.7% in April 2020. While the savings rate declined significantly from that historic high, it averaged 15.1% in 2020, the highest in at least half a century. With income support measures remaining robust for much of 2021 and some business restrictions remaining in place for part of the year, the savings rate remained elevated at 10.9% in 2021.

In 2022, the personal savings rate declined closer to historical averages as fiscal support from the federal government waned and the economy fully reopened. Aggressive interest rate hikes made by the Federal Reserve also added to large decreases during the year. Ultimately, the personal savings rate declined 72.6% during 2022. In 2023, interest rates continued to rise and many household budgets continued to be affected by high prices. As a result, the personal savings rate remained below 5.0%. Despite a resilient economy and labor market, the personal savings rate continued to decline during 2024 due to lingering high costs throughout the economy. In 2025, as interest rates fall, the personal savings rate will increase 14.5%.