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In the two years up to September, 2010, Americans have dipped deeper into their savings than at any point in the past six decades. That’s helping the economy now, but could leave it less prepared to withstand shocks in the future.
Americans withdrew a net $311 billion — or about 1.4% of their disposable income — from their savings and investment accounts, according to the Federal Reserve.
People are acting exactly as policy makers want, at least in the short term. By holding interest rates near zero, the Fed is creating an incentive to spend rather than save — or to “save” in a different way by paying down expensive debt.
One recent poll found that only 35% of Americans had enough emergency savings to cover three months of living expenses. The less money they have for a rainy day, the more vulnerable they will be to job losses and other income shocks.Click here for reuse options!