Savings Rate At It’s Highest
It is interesting to note that the savings rate is the highest since June 1998! What is really interesting though is how the savings rate jumps during recessions.
According to calculatedriskblog (see chart below), this is because people, during economic downturns and recessionary periods, people start building their cash reserves or emergency fund.
This seems a little odd though because if you don’t have an emergency fund at the start of a recession, it is probably too late to help you in your current situation.
Preparedness Is Key
I have discussed the need for an emergency fund and how to start building one in previous articles. It is never too late because recessions and economic downturns will come and go. You must make sure you survive the current so that you can be prepared for the next one, and the next will come.
Various studies have shown that people with a clearly defined savings goal save twice as much money than people who “fly by the seat of their pants”. This is the power of having goals.
The most effective way to save, say $10,000 is to have as much money as you can accumulate through cutting the fat from your monthly expenses. For ideas on how to cut on various expenses, please see “Funding An Emergency Fund”.
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