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Savings Trends in America

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By Daniel Teklai –

Even when the US economy is showing signs of improvement and the global recession is coming to an end, households across the country are still very concerned about the future of their personal finances. The ramifications of job losses, the collapse of the housing market and the tightening of access to credit have left a lot of people feeling anxious and worried. And when people feel worried, they spend less and save more.

According to the US Bureau of Economics, the savings rate – the portion of disposable income people save – has sharply increased in the past few months. Of course this is not a big surprise and historically, savings grow more during uncertain economic periods and diminish when we feel confident about the economy at large. As of November 2009, America’s savings rate stood at 4.7 percent, which is quite a jump compared to just 1.4 percent in 2005. By comparison, Americans stashed away over 26 percent in 1944, and over 14 percent in 1975; and since then, we generally saw a steady decline of the savings rate to almost zero.

Many people actually maintained negative savings rates.

While there are many other factors that may influence people to save money for a rainy day, experts agree that economic uncertainty is the leading motivator.

The economy may be suffering because people are afraid to depart with their hard earned income, but as individuals, saving money is the best way to get the things we want, achieve security, and peace of mind. When you take the first step, saving is actually an easy habit to start and maintain. The first step is to make the decision to save and have a goal in mind. After that, there are essentially two ways to save: using income coming in, or cutting expenses –money going out.

Finally, it is all a matter of sticking to a regular savings plan.

Where to Start Saving money is essential to our peace of mind, but how we do it is also as important.

Stashing money under the mattress may be a time honored tradition but that is neither safe nor smart. A deposit account held at a bank that is insured by the FDIC is the safest way to start savings.

Currently, the Federal Deposit Insurance Corporation (FDIC) insures up to $250 thousand dollars per depositor per bank. Basic saving or money market accounts are good first choices as your money is always available to you.

Certificates of Deposit (CDs) are ideal when you want to save for a specific period of time and you won’t need the money during that period.

CDs usually pay more interest than money market or savings accounts. For long-term savings goals, there are numerous investment vehicles available including bonds, Individual Retirement Accounts (IRAs), mutual funds and stocks. If you have not started a regular saving plan yet, don’t be left out. Start with a simple one today. It looks like the mindset of the average consumer is changing. America is saving money again. So should you.

Daniel Teklai, is Vice President and Director of Marketing for the Premier Service Bank. He can be reached at dteklai@premierservicebank. com.

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