Introduction to U.S. Economy: Personal Saving
link to page 1 
Updated July 13, 2022
Introduction to U.S. Economy: Personal Saving
Personal saving, which includes the saving of households
Long-Term Economic Impacts
but not of businesses or government, can have a significant
In the long term, a higher saving rate will generally lead to
impact at both the individual and economy-wide levels in
higher levels of economic output, up to a point. When
the long and short terms. The personal saving rate was
individuals save a portion of their income, those savings are
disrupted by the COVID-19 pandemic, which resulted in a
generally loaned to businesses to finance new investments.
rapid increase and subsequent decrease in this metric,
For example, an individual’s 401(k) is a saving vehicle for
making future trends in personal saving uncertain.
their future consumption after retirement, but before
retirement, those funds are generally invested in various
Definition and Economic Considerations
companies through the purchase of stocks and bonds.
Individuals receive a certain amount of after-tax income
that they can spend or save. By definition, what is not spent
The overall level of investment is one of the main
is saved, so saving and spending are inversely related. The
determinants of long-term economic growth. Business
personal saving rate, which is the ratio of total personal
investments in physical capital (i.e., machinery, buildings,
saving to disposable income, presents a tradeoff between
and factories) allow the economy to produce more goods
current and future consumption. A relatively low saving
and services with the same amount of labor or raw
rate implies higher current consumption but lower future
materials, increasing the productive capacity of the
consumption. Greater present consumption boosts
economy. As personal saving contributes to investment, all
individuals’ living standards now; however, it leaves less to
else equal, a higher saving rate will result in a higher level
be invested in capital projects that will boost future living
of physical capital over time, allowing the economy to
standards. Conversely, a relatively high saving rate implies
produce more goods and services. For further information
lower current but higher future consumption. This tradeoff
on business investment, refer to CRS In Focus IF11020,
has short-term and long-term economic implications.
Introduction to U.S. Economy: Business Investment.
Short-Term Economic Impacts
How Is Personal Saving Measured?
In the short term, a rising personal saving rate can
The Bureau of Economic Analysis (BEA) measures the
temporarily slow economic activity, assuming no other
U.S. personal saving rate (see Figure 1) as the difference
changes to income. If on average individuals begin saving a
between aggregate income and consumption spending,
larger portion of their paychecks, it means less money is
which likely introduces some measurement error. The
being spent on consumer goods and services in the
saving rate may understate the level of saving in the
economy. Because consumer spending makes up about 70%
economy because certain spending is considered
of the U.S. economy, even a small decrease in consumer
consumption, even though such spending is conventionally
spending can reduce aggregate demand and economic
thought of as investment, such as spending on durable
activity. Alternatively, a falling saving rate may result in
consumer goods (e.g., automobiles, appliances).
temporarily faster economic growth as individuals spend a
Additionally, BEA does not include changes in asset prices
larger portion of their pay on goods and services.
or capital gains as income under the saving rate measure.
Whether changes in the saving rate are helpful or harmful in
Figure 1. U.S. Personal Saving Rate, 1959-2022
the short run depend on the state of the economy. A rise in
the saving rate during an economic downturn can be
problematic. In response to a recession, individuals may
rationally respond to increased uncertainty about their
future income by increasing their saving rate to provide a
buffer against reduced income (caused by job loss, for
example) in the near future. As a result, however, the
economic downturn is further exacerbated due to the
additional decrease in consumer spending resulting from
the rising saving rate. By contrast, in the midst of a healthy
and expanding economy, a rising saving rate may result in a
more sustainable level of consumer spending, thus
preventing the economy from overheating. An overheating
economy occurs when demand for goods and services
exceeds the economy’s ability to produce them, which can
Source: Bureau of Economic Analysis.
result in accelerating inflation followed by a recession.
Alternative measures show that many households are
struggling to save a portion of their income, particularly
https://crsreports.congress.gov
link to page 2 link to page 1 link to page 2
Introduction to U.S. Economy: Personal Saving
lower-income households. According to the Federal
time economic tracker based on private sector data. Despite
Reserve, in 2019, about 58.6% of adults reported saving
the overall increase in the personal saving rate, some
some portion of their income over the past 12 months. As
individuals borrowed or used savings from retirement
shown in Table 1, among families with an income in the
accounts to cover financial obligations, according to the
bottom 20th percentile, 36.5% saved some portion of their
Federal Reserve Survey of Household Economics and
income, whereas among families with an income in the top
Decisionmaking (SHED).
10th percentile, 85.5% saved some portion.
Personal Saving and the Individual
Table 1. Family Saving by Income Level, 2019
Prior to the COVID-19 pandemic, the personal saving rate
was below 10% for a majority of the previous two decades.
Percentile of
Median Income
Families That
In historical context, this was relatively low, with rates
Income
($thousands)
Save (%)
between 10% and 15% for much of the 1950s through
Less than 20
1980s. While the personal saving rate has increased during
16.3
36.5
the recession, there is, as of yet, little evidence to suggest
20–39.9
35.6
47.8
that it will remain elevated indefinitely. Regardless of any
40–59.9
58.6
59.8
future trends in the personal saving rate, the prolonged low
rates have implications for individuals, such as the ability to
60–79.9
95.7
68.8
save adequately for retirement or the ability to pay
unexpected expenses. According to SHED, in 2018, 27% of
80–89.9
152.1
74.1
adults would need to borrow or sell something to pay for an
90–100
290.9
85.5
unexpected expense of $400, while 12% would not be able
to cover the expense at all.
Source: Federal Reserve, Survey of Consumer Finances, 2019.
Notes: Income percentiles based on total family income.
Since 1989, median retirement accounts have grown
Trends in Personal Saving
substantially for families in the top 10th percentile of
income, but much less for all other families, as shown by
From the 1970s to the 2007-2009 financial crisis, the
Figure 2. Further, for those families in the bottom 60th
personal saving rate in the United States had generally
percentile of income, the median retirement account holds
trended downward from about 10%-13% to 3%-4%. After
at a maximum $28,000, likely not adequate for the average
the crisis and before the pandemic, it rebounded partially
retirement length in the United States.
but leveled off at about 7%, as shown by Figure 1.
Economists have suggested the overall decline in saving
Figure 2. Median Retirement Account by Income
across this time period could be due to increasing asset
Level, 1989-2019
prices and access to consumer credit, both of which could
increase consumption as a proportion of income. (Recall as
personal consumption increases relative to income, personal
saving as a percentage of disposable income decreases.)
Savings spiked at the onset of the COVID-19 pandemic,
increasing rapidly to 33.7% by April 2020 as consumer
spending plummeted. After traversing some relative peaks
and valleys, the personal saving rate is now back down to
pre-pandemic levels (5.4% as of May 2022). The extent to
which the pandemic will continue to affect saving behavior
is uncertain and depends on many factors, including the
health of the economy and public health conditions moving
forward.
Source: Federal Reserve, Survey of Consumer Finances, 2019.
Notes: Income percentiles based on total family income. Dates
The personal saving rate increased rapidly during the
correspond to survey years.
pandemic for several reasons, including precautionary
saving, the inability to spend money due to business
closures, and increased personal income from various
(Note: This In Focus was originally authored by Jeffrey
stimulus programs, notably three rounds of economic
Stupak, former CRS Analyst in Macroeconomic Policy.)
impact (stimulus) payments. The inability to spend money
due to business closures and social distancing may be a
Lida R. Weinstock, Analyst Macroeconomic Policy
primary reason for the spike in the personal saving rate.
IF10963
Notably, most of the increase in saving appears to have
been due to high-income households, according to one real-
https://crsreports.congress.gov
Introduction to U.S. Economy: Personal Saving
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10963 · VERSION 33 · UPDATED
Updated July 13, 2022
Introduction to U.S. Economy: Personal Saving
Personal saving, which includes the saving of households
Long-Term Economic Impacts
but not of businesses or government, can have a significant
In the long term, a higher saving rate will generally lead to
impact at both the individual and economy-wide levels in
higher levels of economic output, up to a point. When
the long and short terms. The personal saving rate was
individuals save a portion of their income, those savings are
disrupted by the COVID-19 pandemic, which resulted in a
generally loaned to businesses to finance new investments.
rapid increase and subsequent decrease in this metric,
For example, an individual’s 401(k) is a saving vehicle for
making future trends in personal saving uncertain.
their future consumption after retirement, but before
retirement, those funds are generally invested in various
Definition and Economic Considerations
companies through the purchase of stocks and bonds.
Individuals receive a certain amount of after-tax income
that they can spend or save. By definition, what is not spent
The overall level of investment is one of the main
is saved, so saving and spending are inversely related. The
determinants of long-term economic growth. Business
personal saving rate, which is the ratio of total personal
investments in physical capital (i.e., machinery, buildings,
saving to disposable income, presents a tradeoff between
and factories) allow the economy to produce more goods
current and future consumption. A relatively low saving
and services with the same amount of labor or raw
rate implies higher current consumption but lower future
materials, increasing the productive capacity of the
consumption. Greater present consumption boosts
economy. As personal saving contributes to investment, all
individuals’ living standards now; however, it leaves less to
else equal, a higher saving rate will result in a higher level
be invested in capital projects that will boost future living
of physical capital over time, allowing the economy to
standards. Conversely, a relatively high saving rate implies
produce more goods and services. For further information
lower current but higher future consumption. This tradeoff
on business investment, refer to CRS In Focus IF11020,
has short-term and long-term economic implications.
Introduction to U.S. Economy: Business Investment.
Short-Term Economic Impacts
How Is Personal Saving Measured?
In the short term, a rising personal saving rate can
The Bureau of Economic Analysis (BEA) measures the
temporarily slow economic activity, assuming no other
U.S. personal saving rate (see Figure 1) as the difference
changes to income. If on average individuals begin saving a
between aggregate income and consumption spending,
larger portion of their paychecks, it means less money is
which likely introduces some measurement error. The
being spent on consumer goods and services in the
saving rate may understate the level of saving in the
economy. Because consumer spending makes up about 70%
economy because certain spending is considered
of the U.S. economy, even a small decrease in consumer
consumption, even though such spending is conventionally
spending can reduce aggregate demand and economic
thought of as investment, such as spending on durable
activity. Alternatively, a falling saving rate may result in
consumer goods (e.g., automobiles, appliances).
temporarily faster economic growth as individuals spend a
Additionally, BEA does not include changes in asset prices
larger portion of their pay on goods and services.
or capital gains as income under the saving rate measure.
Whether changes in the saving rate are helpful or harmful in
Figure 1. U.S. Personal Saving Rate, 1959-2022
the short run depend on the state of the economy. A rise in
the saving rate during an economic downturn can be
problematic. In response to a recession, individuals may
rationally respond to increased uncertainty about their
future income by increasing their saving rate to provide a
buffer against reduced income (caused by job loss, for
example) in the near future. As a result, however, the
economic downturn is further exacerbated due to the
additional decrease in consumer spending resulting from
the rising saving rate. By contrast, in the midst of a healthy
and expanding economy, a rising saving rate may result in a
more sustainable level of consumer spending, thus
preventing the economy from overheating. An overheating
economy occurs when demand for goods and services
exceeds the economy’s ability to produce them, which can
Source: Bureau of Economic Analysis.
result in accelerating inflation followed by a recession.
Alternative measures show that many households are
struggling to save a portion of their income, particularly
https://crsreports.congress.gov
link to page 2 link to page 1 link to page 2
Introduction to U.S. Economy: Personal Saving
lower-income households. According to the Federal
time economic tracker based on private sector data. Despite
Reserve, in 2019, about 58.6% of adults reported saving
the overall increase in the personal saving rate, some
some portion of their income over the past 12 months. As
individuals borrowed or used savings from retirement
shown in Table 1, among families with an income in the
accounts to cover financial obligations, according to the
bottom 20th percentile, 36.5% saved some portion of their
Federal Reserve Survey of Household Economics and
income, whereas among families with an income in the top
Decisionmaking (SHED).
10th percentile, 85.5% saved some portion.
Personal Saving and the Individual
Table 1. Family Saving by Income Level, 2019
Prior to the COVID-19 pandemic, the personal saving rate
was below 10% for a majority of the previous two decades.
Percentile of
Median Income
Families That
In historical context, this was relatively low, with rates
Income
($thousands)
Save (%)
between 10% and 15% for much of the 1950s through
Less than 20
1980s. While the personal saving rate has increased during
16.3
36.5
the recession, there is, as of yet, little evidence to suggest
20–39.9
35.6
47.8
that it will remain elevated indefinitely. Regardless of any
40–59.9
58.6
59.8
future trends in the personal saving rate, the prolonged low
rates have implications for individuals, such as the ability to
60–79.9
95.7
68.8
save adequately for retirement or the ability to pay
unexpected expenses. According to SHED, in 2018, 27% of
80–89.9
152.1
74.1
adults would need to borrow or sell something to pay for an
90–100
290.9
85.5
unexpected expense of $400, while 12% would not be able
to cover the expense at all.
Source: Federal Reserve, Survey of Consumer Finances, 2019.
Notes: Income percentiles based on total family income.
Since 1989, median retirement accounts have grown
Trends in Personal Saving
substantially for families in the top 10th percentile of
income, but much less for all other families, as shown by
From the 1970s to the 2007-2009 financial crisis, the
Figure 2. Further, for those families in the bottom 60th
personal saving rate in the United States had generally
percentile of income, the median retirement account holds
trended downward from about 10%-13% to 3%-4%. After
at a maximum $28,000, likely not adequate for the average
the crisis and before the pandemic, it rebounded partially
retirement length in the United States.
but leveled off at about 7%, as shown by Figure 1.
Economists have suggested the overall decline in saving
Figure 2. Median Retirement Account by Income
across this time period could be due to increasing asset
Level, 1989-2019
prices and access to consumer credit, both of which could
increase consumption as a proportion of income. (Recall as
personal consumption increases relative to income, personal
saving as a percentage of disposable income decreases.)
Savings spiked at the onset of the COVID-19 pandemic,
increasing rapidly to 33.7% by April 2020 as consumer
spending plummeted. After traversing some relative peaks
and valleys, the personal saving rate is now back down to
pre-pandemic levels (5.4% as of May 2022). The extent to
which the pandemic will continue to affect saving behavior
is uncertain and depends on many factors, including the
health of the economy and public health conditions moving
forward.
Source: Federal Reserve, Survey of Consumer Finances, 2019.
Notes: Income percentiles based on total family income. Dates
The personal saving rate increased rapidly during the
correspond to survey years.
pandemic for several reasons, including precautionary
saving, the inability to spend money due to business
closures, and increased personal income from various
(Note: This In Focus was originally authored by Jeffrey
stimulus programs, notably three rounds of economic
Stupak, former CRS Analyst in Macroeconomic Policy.)
impact (stimulus) payments. The inability to spend money
due to business closures and social distancing may be a
Lida R. Weinstock, Analyst Macroeconomic Policy
primary reason for the spike in the personal saving rate.
IF10963
Notably, most of the increase in saving appears to have
been due to high-income households, according to one real-
https://crsreports.congress.gov
Introduction to U.S. Economy: Personal Saving
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10963 · VERSION 33 · UPDATED