The purpose of this disclosure is to explain how we make money without charging you for our content.
Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.
Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.
Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.
Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.
To find out more about our editorial process and how we make money, click here.
As Americans continue to claw their way back from the Great Recession, questions are rising about the economic impact of a surprisingly enduring frugality.
The percentage of workers saving more for retirement than they did the previous year just hit a five-year high, according to a report from Bankrate. Meanwhile, the percentage of Americans under age 35 who hold credit card debt has fallen to its lowest level since 1989, according to an analysis by The New York Times.
This is all fantastic news, of course. As the economy has inched forward, many individuals have held on to their wariness from the recession years and are using better times to work on long-term financial goals. Bankrate found that 21% of workers are saving more, while 17% are saving less. There has been steady improvement in this reading since 2011, when just 15% were saving more and 29% were saving less.
We have a well-documented retirement savings crisis in America, and any improvement in savings trends is a positive development. In general, workers find retirement planning issues to be highly stressful. But they also understand that the pension system is troubled, and that preparing for retirement rests squarely on their shoulders. They are taking action.
Bankrate attributed the improved savings to a higher level of job security and greater personal net worth for many Americans—both products of the improving economy. But we also know that the recovery has not benefited the middle and lower classes nearly as much as it has the wealthy.
Saving more is good for individuals and the economy in the long run. Yet if it means spending less in the near term it may be difficult for the economy to kick into a higher gear, one that might accelerate income and wealth gains for everyone.
Millennials and Gen X showed the greatest rate of increased saving, Bankrate found. That resonates with the Times analysis of Federal Reserve data, which showed that those under 35 were swearing off credit card debt in large numbers. Some older Americans have also shed credit card debt, the Times found. But the decline among young Americans has been most striking.
Millennials remain saddled with student debt at unprecedented levels. That is one factor contributing to their unwillingness to take on credit card debt. Many also wear scars from watching their parents or others in their family struggle with a mortgage or outsized consumer debt during the recession—and they want no part of it.
Again, avoiding credit card debt is probably healthy over the long term. No less a light than Warren Buffett has said it is his top piece of advice for new graduates. But in the near term this debt avoidance probably means fewer cars, computers and refrigerators are being bought, and in the medium term it may slow home sales as young people fail to establish a credit score now that banks will insist upon later.
The upshot: Saving more and avoiding debt are positive moves for individuals. Don’t let anyone tell you otherwise. But it may mean slow growth stays with us for a long time still to come.