Increased Savings Rate

On Friday, the government reported Americans' savings rate, as a percentage of after-tax incomes, rose to 2.9 percent in the last three months of 2008. That's up sharply from 1.2 percent in the third quarter and less than 1 percent a year ago.

Like a teeter-totter, when the savings rate rises, spending falls. The latter accounts for about 70 percent of economic activity. When consumers refuse to spend, companies cut back, layoffs rise, people pinch pennies even more and the recession deepens.

The downward spiral has hammered the retail and manufacturing industries. For years, stores enjoyed boom times as shoppers splurged on TVs, fancy kitchen decor and clothes. Suddenly, frugality is in style.

Americans are hunkering down and saving more. For a recession-battered economy, it couldn't be happening at a worse time. Economists call it the "paradox of thrift." What's good for individuals -- spending less, saving more -- is bad for the economy when everyone does it.

Grace Case, 38, of Syracuse, N.Y., is a self-described recovering creditaholic. For 13 years, she charged it all -- cars, clothes, repairs, vacations. She'd make only the minimum card payments to sustain her buying spree for her and her family, which includes her husband and two children.
But after being laid off 2 1/2 years ago from her job as an accountant, she landed another accounting job that cut her salary from $60,000 to $40,000. It was impossible to meet minimum payments on her card balances.

Now, the Cases are on a strict budget. They take "staycations," grow their own vegetables, buy only used cars and pre-pay cell phones. Case hasn't used a credit card in two years. And she's saving more. "It's really a liberating feeling," she said. "If you want something, you have to have the money for it."

This is a great example of stewardship. Keep it up!!!!!!!!!!!