What Goes Up…

…must come down–or so the saying goes. And in the case of the personal savings rate, this month’s data seems to prove the maxim. The Bureau of Economic Analysis (BEA) is out with this month’s data. The personal savings rate for June came in at 4.6%, down significantly from May’s 6.2%. And so, thus ends the nation’s new found infatuation with savings.

Well, not really. As the BEA reported, and Alejandra Lopez-Fernandini explained, May’s extremely high personal savings rate wasn’t so much the continuation of a new trend in personal savings (rich people discovering coupons, that sort of thing) but the result of some large, though short-term, changes in public policy:

“…one-time payments to seniors, veterans, and others as part of the stimulus increased personal income by 157.6 billion in May, and one-time tax credits to working low-income populations decreased personal outlays by 49.8 billion. Other big changes that pushed up the Personal Savings Rate for this year’s first quarter were government unemployment insurance benefits, which increased 34% from the fourth quarter of 2008.”

There were other factors at work as well, as explained by the New York Times. So, this month’s big dip in the savings rate was to be expected. However, the 4.6% rate recorded in June is still significantly higher than the rate from June 2008 (3.5%) and June 2007 (1.8).

It is one thing to view this data reactively and see it as dictating larger trends within our society. It is quite another to take steps to promote and ensure a long-term pattern of healthy savings behavior, as Reid Cramer highlighted yesterday in the words of Michael Johnson:

Over the last 25 years, we witnessed a profound change in the way that consumerism in the UK was funded. Increased levels of personal debt and diminished levels of personal savings that became the norm during sixty quarters of unbroken economic growth have proved to be unsustainable. A more austere approach to personal financial management is already being advocated and the future may hold a comprehensive policy framework that encourages people in the UK to make building assets a lifelong endeavor.