Consumers are saving the least since 2022, despite “pretty, pretty good” economy

Incomes are up, consumption is up too — but the personal savings rate is down to 3.4%.

The Commerce Department released new data Friday: Personal income was up in June — we’re taking home more money. Consumption was up too. The thing that’s down? Savings.

The personal saving rate — that’s how much you save divided by your disposable income — was 3.4% in June. That’s the lowest level since November 2022.

When describing how consumers are doing right now, economist Robert Frick likes to quote comedian Larry David:

“I like to say it’s pretty, pretty good,” he said.

We’re earning more, we’re spending more. But there’s a reason there’s a couple of qualifiers before “good.”

Frick, who’s corporate economist for the Navy Federal Credit Union, said most people don’t have much money left over to save. 

“Lower-income people truly are tapped out,” he said. “And the burden of inflation is still very real and heavy, and we’re going to certainly be feeling that for at least a year or two to come.”

It’s not just higher prices — it’s also higher interest rates. 

If people have been buying things on credit or taking out loans, they have even less money left over, said financial risk consultant Mayra Rodriguez Valladares.

“Credit cards, certainly, have been brutal for American consumers, right? The rates have been so high. And so it’s very difficult for Americans to save,” she said.

Others are choosing not to save because there’s more tempting places they can put their money. 

Merrill Reynolds Jr., a faculty member of the banking school at Southern Methodist University, said people who can afford to are investing.

“It might be real estate, might be stocks,” he said. “Potentially, the stock market or other types of investments out there have certainly been more lucrative — provided you know what you’re doing.”

For those determined to stash some money away, Frick said to snap up a savings account with a higher interest rate. 

They’re not gonna be around forever, and they’re pretty, pretty good.