Measuring Personal Saving: A Tale of American Profligacy

Brief

Measuring Personal Saving: A Tale of American Profligacy

May 14, 2008

Abstract

Official measures suggest that personal saving has been declining for the past 20 years, and even became negative in 2005. Inadequate saving threatens retirement preparations and reduces investment, which helps boost worker productivity and ultimately wages and living standards. However, neither of the two prominent measures of the saving rate, one based on the National Income and Products Account and the other on the Flow of Funds, exactly conforms to what most people think of as saving. This brief explains the measures and describes how they differ.

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