Americans saving more during tough economy

SALT LAKE CITY — Americans had saved less and less of their incomes since the 1980s, with savings of only 1.2 percent of disposable income in the third quarter of 2005 and also in the first quarter of 2008, according to research by the Utah Foundation.

However, during this recession, Americans changed that habit.

On average, individuals saved 1.7 percent of their disposable income in 2007, upping that to 2.7 percent the next year and 4.2 percent in 2009.

In the second quarter of 2009, individual savings rose to 5.4 percent of their income — the highest quarterly savings rate since the second quarter of 1998.

A Utah Foundation report issued in early July suggests that although Americans are not spending — which government officials have encouraged to help the economy — the higher savings rate may be good for the economy.

"First, business investment depends on domestic savings or foreign investment, and a greater saving rate provides more capital for investment," the report said. "Second, increased saving provides greater security to households, helping to avoid future financial crisis caused by widespread defaults on debt.

"These two benefits of increased saving could lead to stronger economic growth in future years, even while the current economy is slowed by lower consumption."

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