Americans are saving less as the economy and stock market heat up and they boost their spending on big-ticket items like cars and refrigerators.
The U.S. saving rate fell to a 10-year low of 3.1% in September, down from a recent peak of 6.3% in October 2015, the Commerce Department said Monday.
Low unemployment and rising stock prices are likely contributing to household optimism, making people willing to save less and spend more in anticipation of continued job and wealth gains.
The saving rate has now sat below 4% for seven straight months. It likewise hovered at low rates in the late 1990s, when stock prices soared and the jobless rate fell below 5%, and again in the mid-2000s, when home prices soared and the unemployment rate again dropped.
It is ill-advised for people to decrease their savings. In the 21st century, the advances in medical care mean that we will likely live longer than our parents and our grandparents. This means that Americans will need a strong savings account to draw upon in retirement to maintain their standard of living. It also means they need to actively invest and earn higher than 10% returns on that investment.