Negative Savings Rate

I heard the term on a recent radio report, which stated that 2005 was the first year since the Great Depression in which Americans, as a whole, had a negative savings rate. What I would like to know–and leave a comment if you think you know the answer–is why the fact that 2005 was the first year in which Americans spent more money than they earned was phrased in such a strange way.

Negative savings rate? Is that a poor attempt to make a straightforward point in a way that is intended to sound more intelligent? Is it a deliberate attempt to confuse? Is it a way to try to make the fact that Americans spent more money than they saved, which is clearly a negative event, into a perceived positive since negative savings rate doesn’t sound that bad? It’s a savings rate, which is good, but it’s not a positive one.

All I know is that I had the absence of a positive reaction when I heard it.


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3 Responses to Negative Savings Rate

  1. User says:

    Savings rate, much like disposable income or interest rate, is a standard economic metric. No one was attempting to make a point with the phrasing. The value for the savings rate is the result of a formula, and that value just happened to be negative. It’s just math.

    Reply from Paul: It may be a standard economic metric; however, I don’t know if the person who made the statement on the radio was attempting to make a point with the phrasing or not. His intention is unknown to me.

  2. Browser says:

    Math or not, “negative savings” sounds strange. When something is saved doesn’t that mean it’s being accumulated? Assume my savings account had a balance of $150 at the end of June and at the end of July the balance was $100. The “math” tells me I negatively saved $50. Most normal people would simply say I lost money.

  3. dterry says:

    Actually, what it means is not that “Americans spent more money than they saved,” but that they spent more money than they EARNED. Meaning, you earn $100, but spend $125. You could have taken the $25 out of your savings to spend it, or put it on a credit card. That the whole nation is doing this is, to me, a little scary.

    The reason for using that particular phrase “savings rate” (which in my opinion should be explained when used) is it allows you to make an apples-to-apples comparison to other years and know you’re talking about the same thing.

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