Econ Quiz: Personal Savings Rate

(Image Source: Josh Appel / Unsplash)

January 2022


Reducing debt, earning more money, and saving more are common New Year’s resolutions. This month’s quiz focuses on the personal savings rate. Americans in previous generations saved at higher rates than today’s U.S. residents. From January 1959 through January 1985, the personal savings rate for U.S. residents exceeded 10% of their disposable income in 292 of the 313 months during that time period. Savings trends shifted dramatically in 1985. In February of that year, savings rates dipped to 9.1% of disposable income, exceeding 10% of disposable income in only four of the 734 months between February 1985 and February 2020, our last pre-pandemic month.

Change can occur swiftly. The economic uncertainty of the pandemic, sudden swings in income, and changes in how and when we are able to purchase goods and services have combined to dramatically affect our savings habits during the pandemic. In response, we have saved at higher rates during the pandemic than at any point since 1959.

From the start of the pandemic in March 2020 through November 2021, the last month for which data is available, the overall monthly personal savings rate for U.S. residents has averaged 14.98%. We’ve exceeded 10% in 16 of the 21 months during that time period, and, in six of those months, the personal savings rate soared above the previous record of 17.3% set in May 1975.

The monthly personal savings rate for U.S. residents hit a 72-year high in April 2020. How high did it go?

A. 50.1%

B. 28.2%

C. 17.3%

D. 33.8%

ANSWER

Answer D. Savings rates jumped to 33.8% in April 2020 and remained above 10% through May 2021. There are some signs that we are slipping into old habits. After hovering around 10% in June and July, the personal savings rate began a steady decline in August, landing at 6.9% in November 2021.

Source:

Federal Reserve Bank of St. Louis. (2022). Personal Savings Rate.


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