Long ago, in a galaxy far, far away, there was a time when people actually saved money. Indeed, they would take a certain portion of what they made from their income-producing jobs and hold it for later use.
What were these crazy people thinking? How different was their society compared to our own?
A tremendous personal financial shift occurred on the heels of the Great Depression. People – especially the young ones who grew up through the 1930s – began saving money like crazy. They justified it easily because the Depression didn’t give very much notice before it struck nor how deeply it would impact the country.
“Who knows when it will happen again? I’m going to save money,” they would say. So, in 1943, the personal savings rate was 27%.
Fast forward 80 years; welcome to the heels of the Great Recession. In March of 2010, the personal savings rate for American households was 2.7%. That’s down from 3% in February. (Personal savings is disposable income, or take-home pay, minus expenses.)
The talking heads will tell you that Americans are burdened by consumer debt, houses worth less than what they owe, and high unemployment. I think those are excuses made in the name of retaining a lifestyle that many of us incorrectly believed we could afford.
Remember your history: the 1920s were “roaring”; ironically the savings rate was similar to today’s. From debt usage to spending, there are many striking financial similarities between the 1920s and 2000s. What appears to be dissimilar is the response.
The rearview mirror of history gives us 20/20 vision. Perhaps in ten more years American piggy banks will plump back up. At this point on the timeline, there’s little evidence to support that we’re learning the lessons those folks did long, long ago in a galaxy that looks like my hometown.