Improve Your Personal Savings Rate

Guest post by Dale Gunther, Vice Chairman of the Board, People’s Utah Bancorp

When the economy was hard hit in late 2008, consumers began to worry about their future. With unemployment rising and investments faltering, many began to get serious about paying down debt and setting aside rainy day funds. Now, as the economic recovery unfolds, guards are falling—and so is the personal savings rate.

Today’s personal savings rate

In 2009, the personal savings rate  (personal saving as a percentage of disposable personal income) surpassed 7 percent but has been creeping back down as  consumer spending increases. The fourth quarter 2011 personal savings rate was an unimpressive [Oct: 3.6 percent, Nov: 3.5 percent, Dec: pending].

We shouldn’t be surprised. This is a pattern we’ve seen since the Bureau of Economic Analysis (BEA) began tracking personal savings rates in 1959. A brief history according to BEA data:

1960s-early 1980s

Throughout the ‘60s, the personal savings rate averaged 8.3 percent. Savings spiked in the early ‘70s when the country was in deep recession, reaching an all-time high of 14.6 percent in May 1975. By the end of the decade, the savings rate fell back to 8 percent range, only to jump back up to 12.2 percent during a recession in the early ‘80s.


By 1984 when the economy was in recovery mode, the rate was 10.2 percent and continued to decrease throughout the decade. The early ‘90s saw rates around 7 percent, despite another recession, while the prosperous mid-‘90s produced a freefall in the personal savings rate until it hit a low of 2 percent in September 1999.


In the first decade of the new millennium, greater access to credit led the savings rate to dip below a meager 1 percent, with more and more individuals getting trapped in a negative savings rate environment. Enter the recession in late 2008 and the rate started inching back up, peaking at 7.1 percent in May 2009.

What history teaches us

The ironic reality, as evidenced by the above history, is that personal savings rates go up during recessions—when consumers can least “afford” to save—and, lately, have been much lower or even nonexistent during economic boom times.

It is evident that history repeats itself, but you can break the cycle.

Start with a savings plan and a commitment to spend less than you earn. One way to stay on track is with Bank of American Fork’s new Online Money Manager tool, which allows you to categorize transactions, set saving goals and get a complete financial picture of all your financial accounts—including those at other financial institutions—in one place.

The important thing is to take steps now to prepare for the future.

Dale Gunther is vice chairman of the board of People’s Utah Bancorp, the holding company for Bank of American Fork , which is an Equal Housing Lender and Member FDIC. At the start of his 16-year tenure as CEO at Bank of American Fork, the bank had two branches and $80 million in assets; it now has 13 offices and more than $890 million in assets. Dale has served as chairman of the Utah Bankers Association and currently serves as an American Fork city councilman. This article should not be considered legal or investment advice. Seek legal and investment advice from your own qualified professional.


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