Higher Savings Rates Could Have Long-Term Benefits to the Economy

Politicians and economists sometimes take a different view of savings rates. To politicians, whose re-election often depends heavily on a thriving economy, savings rates represent money that is not being spent right now, and that means less economic growth between now and election time. To economists though, a solid savings rate is a sign of an economy building a solid foundation for the future.

All of this is relevant to recent figures which showed that the U.S. personal savings rate rose from 4% to 5% during the second quarter of 2009. For everyone involved in trying to jump-start the economy (which come to think of it, may be one of the few growth industries out there) this news is a little disappointing, since it shows people are still cautious about spending rather than saving.

To economists with a longer-term perspective though, this news is refreshing after the long and steady rise in household debt levels which preceded this recession. Rebuilding savings is a necessary step, and it will make the economy healthier in the long run. If you have wondered what will drive the economy once all the government bailout and incentive money runs out, well, re-stocked household savings might just be the answer.

In the meantime, more savings means more money going into savings accounts. This makes it more important than ever to shop actively for savings account interest rates. The more money being saved, the higher the stakes get.

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