The United States Personal Savings Rate Freaks Me Out.

When I look at the fall of the personal savings rate in the United States over the past 50 years, I cannot help but cringe. We're on a fairly linear trend towards completely obliterating our personal reserves.

Personal savings are one of the few things that keeps people above water when the inevitable vagaries of life knock us off our feet. Without savings we're all more prone to getting taken advantage of (e.g., we can't afford to leave a bad job), less capable of recovering from unexpected expenses, and often more risk-adverse (thus turning down opportunities we might otherwise want to take).

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One facet of the problem is that we are, as a whole, living well beyond our means. Eating out far too much, buying far too many gizmos and clothes, and expending money far beyond what's sustainable. As a consumer society, we're living in the here and now -- all but guaranteeing that even tougher times are going to lay ahead.

But the flip side of this problem is the institutionalized processes and mandates that strip individuals of an ability to save. Medical expenses and college costs have both gone through the roof -- systematically sapping our society of savings. Cities are built in ways that all but mandate car ownership -- and often dual-car ownership for multiple bread-winning families. Credit cards allow us to overextend ourselves and extract interest that otherwise might have been saved. Social safety nets to help the working poor move up in the world have been disassembled, tax breaks accrue to the rich, and better incentives to promote savings have not been developed by banks and other financial institutions.

We're a "spend it now society" -- but when you don't save for a generation, you all but guarantee multiple generations of hardship. I fear it's going to be a remarkably grim future for Americans. Most of us have no idea how overextended we actually are -- both individually and as a country. And yet, few politicians and decision-makers -- who should know better -- are raising concerns about our current trajectory.

My colleagues at the New America Foundation just released a new (free) resource and analysis, "The Assets Agenda: Policy Options to Promote Savings and Asset Ownership by Low- and Moderate-Income Americans" that is well worth the read:

While it focuses on institutional changes to help promote savings, the lessons for individual-level intervention are equally compelling.