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To save or not to save

By Judy Martel · Bankrate.com
Wednesday, May 19, 2010
Posted: 3 pm ET

No doubt the global recession of 2008 and the resultant high unemployment, housing foreclosures and a volatile stock market  are bad, but as dark as it seems, many economists still point to the 1982 recession as being worse.

But consider this fact: The personal savings rate in 1982 peaked at 10.9 percent, versus a rate of just below 3 percent in the second half of 2008, according to the Bureau of Economic Analysis. And that 3-percent figure is an improvement over the previous four years, when the rate was below 1 percent, or even in negative territory.

The 1982 recession spun off the 1979 revolution in Iran that brought about sky-high oil prices. As the Federal Reserve sought to control inflation by raising interest rates, home sales fell, and once again the Midwest was hit especially hard (that's when they earned the name "Rust Belt").  Nationally, unemployment rose above 10 percent in 1982; in April 2008 it was 9.9 percent, according to the Bureau of Labor Statistics.

So is it better to save or spend as the economy struggles to improve? When Americans save, we allow companies a bigger pot of money from which to borrow to create infrastructure, which in turn creates jobs.  It also reduces our reliance on credit from overseas. But because consumer spending makes up two-thirds of our economy, the short-term effect of not spending means that companies, and in turn all of us, suffer.

But in the end, it comes down to a level of individual personal comfort. So tell us about you: Are you saving more or less now than you were before the 2008 recession?

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1 Comment
Lelia
May 21, 2010 at 3:43 pm

With all what happen currently, this is hard to decide what I should do personally. In a way, I do not think that spending now could seem interesting to help the economy now. Nevertheless, most of the time, in those period we do not spend our money most efficiently. All is emotional.
So saving would be to act for the future and the health of our economy.
Another point that makes me thinking is that during big recessions, incredible wealth empire appeared. Visionary people in our history decided to invest during recession and become multimillionaire. We could name Donald Trump, John Templeton or Warren Buffet.

So, in my case, I decided to be a visionary person and to invest!
I am now on the way to develop my skills in personal finances, investment and personal wealth creation....
Bankrate will probably help me to achieve my goals in 2010.

Lelia