The personal savings rate of Americans has dropped below zero for the first time since the Great Depression, according to a report released by the U.S. Bureau of Economic Analysis.
The bureau calculates the figure by totaling personal income and deducting taxes and expenditures, and whatever is left is designated as savings, said Richard Vedder, professor of economics at Ohio University.
That means money in stocks, bonds, or real estate, is voided from the equation altogether.
I should point out
(the savings rate) has been falling for a long time Vedder said. (Though recently) it literally has inched down to zero or a little below that.
Several factors have contributed to this decline in personal savings, he said.
People said
'Heck. The value of our stocks is going up - we're getting richer
' he said. We're getting better off. We don't need to save.
He said the real-estate boom has been a major factor.
Some people probably felt really prosperous
he said. It's kind of on paper. It's not real
in a sense.
The rise in the stock market during the 1990s prompted many individuals to relocate funds from relatively low-interest savings accounts to high-yield mutual funds or individual stocks, he said.
Also, before the Bush tax cuts, individuals could be taxed on fictitious gains in holdings - money gains because of inflation that do not reflect any real gain in purchasing power. That means the real goods people could buy actually decreased even though their personal savings increased.
Though the data do not specify differences in the savings of age groups, college students typically save less than other demographics.
Students are not only earning less per year than most of their out-of-school counterparts, the recent rise in tuition also forces many to rely on loans.
A Feb. 2 New York Times article reported the interest rates on federal Stafford Loans will change from 5.3 percent to 6.8 percent beginning in July, as Congress passed a law to increase revenue from the loan payments.
Many OU students said they save money only during summer jobs.
I worked during the summer
said freshman Katie McCune. I would try to save half of it. She said she thought the savings rate went down because the permeation of advertising has lessened the importance of saving.
Our parents valued money a lot more than we do
she said.
These financial decisions, however, will affect students' futures.
I don't think (students) really grasp they have to pay off the loans
said freshman Jacqueline Garry. They're living in the now.
