'Frugality Fatigue': Could Higher Spending Lead to Higher Savings Rates?

June 15, 2010

By Barbara Marquand | Money Rates Columnist

In releasing its latest poll on consumer spending, Gallup coined a new syndrome with which most of us can relate: "frugality fatigue."

Who, after all, hasn't grown tired of clipping coupons, putting off big purchases and saving every spare dime, only to find savings rates at minuscule levels during the recession?

Unfortunately, the rich apparently are the only ones who can provide themselves with the antidote.

Upper-income Americans' self-reported spending jumped 33% last month from April, reaching $145 per day, versus the previous month's $109 per day. It was the highest monthly average since November 2008.

The self-reported spending of middle- and lower-income Americans, though, remained flat at $59 per day.

What caused the wealthy to step up their spending? Gallup researchers theorize that many upper-income consumers have the wherewithal to increase their spending, but had been holding back due to economic uncertainty.

"It could be that many upper-income consumers are experiencing 'frugality fatigue,'" Gallup reports. "That is, they are simply tired of cutting back and want to go back to spending -- maybe not as freely as they did prior to the recession, but at higher levels than they did last year, when frugality was commonplace."

Spending Impact on Interest Rates

Any increase in spending is good news for the economy. Spending creates demand, which creates more jobs, and as the economy heats up, savers may finally be rewarded with higher interest rates on CDs, money market and savings accounts.

But it could be a while before middle-income folks return to spending.

In a separate Gallup poll, half of Americans said last month they were feeling better about their financial situation, fewer than in April, and that worsening attitude is holding so far this month. The waning optimism could be due to the stock market slide in May, or even concerns over the European debt crisis, Gallup said.

Your responses to ‘'Frugality Fatigue': Could Higher Spending Lead to Higher Savings Rates?’

Showing 0 comments | Add your comment
Add your comment
(required)
(will not be published, required)