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How Has the Recession Changed Your Saving Habits?

As once-healthy companies go under and surviving companies cut vast swathes of their workforce, the personal savings rate has gone up. While American savers were averaging 1% or less from late 2004 to early 2008, the average personal savings rate has–skyrocketed?–to over 3% in the final quarter of 2008 (this chart gives a great visual).

This is a real improvement over the first quarter of 2005, when the national average dipped below 0%!

How have you changed your own saving habits in the recession? Are you saving more? Is it going toward retirement or into short-term savings (savings accounts, cds, etc)? What are you giving up to save more? Or are you finding ways to make more money?

Fortunately, our earnings haven’t been affected so far. Our debt repayment is chugging along, but we’re putting the money into savings right now, since the student loans are deferred. Like Frugal Dad’s safety net method of debt repayment, this means we have the money as a backup in case there’s an emergency in the meantime. It also picks up a little interest.

I asked others on Twitter and got the following responses:

Christian PF – “I am saving more and trying to build a bigger rainy day fund by minimizing luxuries.”

The Passive Dad – “Saving much more in the last year and making do with what we have. Home projects vs. hiring someone to build it.”

Remodeling This Life – “saving more, yes. not giving up anything since am making more $$ to save so all that has changed is more money coming in to save”

Money Monk – “yeah, I save 30% of my income”

Centsible Life – “saving more by pre-paying debt. We -expenses, and +income by me getting 2 part-time jobs (and blogging!), before I was a SAHM.”

Poorer Than You – “Less likely to make extra payments on student loans, saving instead to avoid going into credit card debt.”

Meg from Frugal Wiki – “We’ve been spending more and more carefully but not because of the recession per se.”

P MacDougall – “Recession has not changed my savings habits. Nothing to give up until its time to move into my car. Which is years off :)”

Graduated Learning – “Still spending like I used to (which is not much). spending more paying off student loans.”

Moolanomy – “Didn’t change a thing. Keeping my long term strategy.”

Clever Dude – “We’ve definitely been saving more and spending less, not even paying down debt faster until we figure out a plan.”

Pecuniarities – “Definitely. I’ve always been frugal but allowed little luxuries like buying used books. Now, it’s just necessities.”

What about you?


{ 2 trackbacks }

Richer by the Day » Irrational Pessimism Towards The Stock Market
March 9, 2009 at 11:41 am
Pecuniarities
March 10, 2009 at 10:01 am

{ 18 comments… read them below or add one }

Miranda March 5, 2009 at 8:34 am

I’m definitely in the “saving more” crowd. We’re setting more aside and spending less on the non-essentials. We don’t HAVE to yet, but the point of good preparedness is to start doing it before you are forced to.

Laura in Atlanta March 5, 2009 at 9:19 am

Oh, I am saving a lot more . . . throwing $ into short term CDs mostly, building a ladder so that I can access as needed. Building up my emergency fund, and even started a teeny $10/week transfer to ING – just cuz. 😉 FOr me, a gal who has NO debt at all, I consider myself lucky, but I work in non profit and ya never know in this climate about job security. So . . . just beefing up where I can. Also, this whole ‘crisis’ has made me just more aware of my spending over all . . . so, doing my best to cut down where I can.

John March 5, 2009 at 9:30 am

Haven’t really made any changes, per se, as we finally dumped our student loans and started ratcheting up our savings over the past year or so anyway. If anything, I’ve been putting more into the market now that all the stocks are “on sale” and I’m keeping a long-term perspective on it.

J. Money March 5, 2009 at 9:46 am

the recession wasn’t the one who prompted me to start saving or doing anything – buying a home was the culprit for me 😉 ever since I’ve been saving and frugalin’ like a mad man.

and it’s a good thing to w/ what’s now going on in this silly economy!

StackingPennies March 5, 2009 at 10:39 am

As others, I already was “saving more” before we were in a recession. I even specifically decided to focus almost a year ago exactly, before all the layoffs happened.

The trouble is, you can’t wait for the bad times to come to start cutting and saving. Several months of good saving won’t build up a proper efund. (This could apply to our gov’t too. Perhaps they should have been more focuses on THEIR spending and income in the good times so in the bad times, a tax cut/stimulus wouldn’t make us so broke!)

Diane March 5, 2009 at 11:38 am

I was already saving more before the recession, as I had my debt almost paid off (other than mortgage). I’ve since finished paying the debt and increased the savings.

I’m avoiding debt of any kind at the moment, even no-interest debt for necessities. (Home Depot). We’re very close to needing a new water heater, but I’ve put that off for the moment. I can pay cash for it, but would probably charge it at no interest then make the monthly payment, knowing I can pay if off at any time if need be. I like using free money while keeping my cash in savings!

We have cut back on most unnecessary spending – still go out to dinner once a week, but keep it cheaper.

I’m fortunate to have a very low house note & mortgage balance, and my job is secure for the moment, but I’m not taking any chances.

At the moment my savings is in an ING Account, but I’m looking at doing a CD ladder – if I can find a decent rate CD.

I will continue to defer any major purchases or house projects for as long as possible, while saving as much as possible until things improve.

Dawn March 5, 2009 at 11:53 am

Well, my way of life has changed dramatically due to divorce, not the recession. I have to pinch every penny! I am also making a much larger concentrated effort to quick pay of my car and credit card, so I can save that money in the months to come.

Mike March 5, 2009 at 12:24 pm

My change echos what John said. I’m saving the same amount, but have shifted as much of that amount as possible into the stock market. We’ll look back at these prices one day and wish we had invested even more. It may take some time, with more pain before that point, but as a long term investor I can live with that.

Dana March 5, 2009 at 1:48 pm

Mike’s comment is amusing since yesterday there was a headline in my local paper about President Obama saying that now is a good time to invest in the stock market. I think the tone of the article was a tad incredulous but really, when do they think is a good time? When the market’s at its peak? *laugh*

You know what, though? This type of experience has actually turned me off to the stock market. I’ve watched my best friend lose thousands in her 401(k) and I know it’s supposed to rebound, but I think about the ground she’s lost and I’m kind of sad. She’s 35, like me. She still has time, but not an ideal amount.

I must keep my standard of living to an undesirably low level in order to amass any significant savings (as in, foregoing health insurance, letting someone else pick up the tab on groceries–that bad; my rent is over half my income because I got out of a dangerous neighborhood!), but I’m inclined to follow the Your Money Or Your Life philosophy–not trying to squirrel it all away for a day in the future when I won’t work anymore, but transitioning my income to interest income now so that I have more choices about when I work and for how much. For that reason I’m a big fan of fixed income. Even if I lose ground because of inflation there is a big difference between working part-time to make up the difference, and having to work full-time until I’m 80 because I didn’t have enough saved up in my 401(k) to see me through from age 65 until I die. There is no shame in working, even when you’re old.

Dawn/FFL March 5, 2009 at 6:24 pm

For me the recession just makes me stay on my toes at work – I don’t want to mess up and lose my job
It also means that we stay home more and when we do go out we find free events and tours.

Funny about Money March 5, 2009 at 9:20 pm

Saving more, planning expenditures carefully, avoiding all unnecessary expenses, looking for less expensive everything (from groceries to hair stylists), working extra jobs, pinching every penny, and hoarding food and household necessities.

Stephanie March 5, 2009 at 10:10 pm

Can I just say that, in these past few days of Twitter, I’ve already gotten pretty addicted!

TStrump March 7, 2009 at 2:22 am

Still saving the same amount.
Also watching my spending more.

Maureen March 7, 2009 at 4:29 pm

I think most things have stayed the same considering saving. I am trying not to spend my income except for necessities. I was looking at my spending diary and it seems all I’ve been buying is food and conditioner. It really annoys me when something breaks. My ‘beloved’ rucksack (which when I bought I spent a week and lots of considering as £35 was a lot for a 15 year old) one the straps snapped on my way to work! I was gutted but knew I could no longer sew it and it would be fixed. It was time to buy a new one. Five years on the cost of rucksacks has increased! Got my new one for €49.95. I’m happy though as it’s a hiking bag and extra strong for all those heavy uni books.

I’ve been spending a lot of time in too. It’s not been that depressing though and has given me plenty of time to work on my dissertation and my financial game plan for my final year of univerisity.

I agree with the comments about keeping on your toes at work. I’ve started listing my achievements on a weekly basis so that when I apply for jobs this summer I have some more beef for my c.v.

@mrs micah: I like the idea of asking this question. It’d be nice to see how it changes over the course of the next two years.

Maureen March 7, 2009 at 4:32 pm

“We don’t HAVE to yet, but the point of good preparedness is to start doing it before you are forced to.”

@ miranda: Noted in my finance book along other clever quotations! So apt. It definitely softens the blow

Squawkfox March 10, 2009 at 11:44 am

I operate my finances in the same manner despite the economic climate. I save lots and I spend little – only buying what I need. The difference is now people don’t give me a hard time if I don’t go out for lunch or spend on whatever. These days I think people have a better understanding of why savings are needed.

Maureen March 19, 2009 at 3:58 pm

As strange as it might sound I’m glad more people are being considerate about my choices not to eat out at that fancy new restaurant and not to blow my entire wages on a night out. It’s a shame that it’s a recession that has made them more aware.

Diane March 19, 2009 at 5:43 pm

@Maureen – It is a shame it’s taken a recession to convince Americans to save, but that’s the way it seems to be.

My boyfriend & I have observed that it might be a much-needed correction in the American way of life…

Nothing wrong with spending money if you have it – meaning if your debt is paid, your bills are paid and your savings are funded.

The whole notion of using a credit card for trips, games, dining out, extra clothes & accessories – and NOT paying it off is horrifying to me.

I’ve vowed to never use a credit card again for something I can’t pay off – unless it is a dire necessity. I sure hope my emergency fund would cover that and it will never happen. I was already in that mode, but this recession has solidified it for me.

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