Originally published February 23 2006
America's personal savings rate the lowest since the Great Depression
by Mike Adams, the Health Ranger, NaturalNews Editor
According to Newsday.com, the personal savings rate in America slipped to negative 0.5 percent last year, the third worst savings rate in the country's history.
Americans' efforts to save for a rainy day ran dry last year, as the nation's personal savings rate went negative for the first time since the Great Depression.
The savings rate -- the percentage of household income that consumers don't spend -- slipped from 1.8 percent in 2004 to minus 0.5 percent last year, making it the third-worst rate in U.S. history.
That has happened only twice before -- in 1933, when the savings rate was minus 1.5 percent, and in 1932, when it was minus 0.9 percent -- as the country struggled to recover from the worst economic collapse in history.
This time, a real-estate boom, not an economic trauma, was responsible for eroding Americans' willpower to save some of their cash for emergencies or retirement.
Experts said Monday that, as skyrocketing home values created a sense of added wealth, many homeowners opted to spend more of their income -- and then some -- last year.
Analysts said that's a risky strategy, especially now that the red-hot housing market appears to be cooling and the first millions of baby boomers are reaching retirement age.
Jason Royal knows the value of saving, but the 29-year-old auto-service technician finds it difficult to set money aside.
You know, we needed the money for now, not for later."
He also said he and his wife have taken advantage of their home's rising value, refinancing a couple of years ago to take out some cash and, more recently, taking out a home-equity line of credit.
The Royals' financial strategy is typical of many U.S. families, experts said.
But while some bemoan the overuse of home equity, such credit lines can be a positive source of financing, said Stan Smith, a finance professor at the University of Central Florida.
The 73-year-old retired aerospace worker, who lives in Oviedo, was born during the nation's previous savings crisis.
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