The Paradox of Thrift: How a Better Savings Rate is Fueling the Recession

by David Fessler, Advisory Panelist

We’ve all heard this from our parents: “Spend what’s left after saving, instead of saving what’s left after spending.”

Or perhaps this was drummed into your head: “Always save for a rainy day.”

The idea of saving didn’t just start with our parents’ generation, however. Ben Franklin was giving advice on saving way back in 1732 in Poor Richard’s Almanac: “If you would be wealthy, think of saving as well as getting. Creditors have better memories than debtors.”

As the recession of 2008 hit, Americans suddenly stopped spending, paid down their debts and started saving – some for the first time in their lives…

As a result, America’s savings rate – as a percent of disposable income – has leapt from a little over 1%