Tuesday, February 18, 2020

Interest Rates and Savings Rates

Saw a chart showing the US savings rate over the years today.  It's interesting.  Here's the wikipedia page, which only goes to 2010. (Is wikipedia losing its oomph?)  It shows the savings rate dropping to about 4 percent in 1998 and 2 percent in 2005, recovering to about 7 percent in 2010. Since then the rate has been in the 7 percent neighborhood.

Some of the discussion, at least on one site, is how low the rate is, when considering how much people should be saving for their retirement.  But the article where I saw the graph was emphasizing the positive, the revival of the rate since the recession, noting how low the interest rates are currently.

That caught my attention.  I know just enough about economics to know that interest is the price of money.  So my (maive) assumption is that the higher the interest rate the higher the savings rate. But that doesn't appear to be the case.  I must be missing something.

(It is interesting the fluctuations of savings--in my young adulthood it was around 10 percent, from 1975 to 85 it declined to 7 percent before its most recent drops.

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