Saving and the Economy
by Shaun Somers on Oct.01, 2009, under Budgeting
Americans and Canadians are finally beginning to save money again. For a few years in the mid-2000′s savings rates actually became negative in America, meaning that families on average were going more in debt each year. Thanks to the recession, people are beginning to consume less and set aside more money for a rainy day. Unfortunately there are many commentators who percieve this as a bad thing! They think that people borrowing money and spending it is what is needed to return the economy to growth. Nothing could be further from the truth. The fact is that too much borrowing and spending (by individuals as well as governments) is what caused the current crisis; it can hardly be fixed with more of the same. The savings of today become the basis for future expansion and growth of the economy as they are put to use by entrepreneurs and investors to produce more wealth, instead of to merely spend on more stuff like the average consumer would. We Canadians are fortunate that our government has recognized the value of saving by creating the Tax Free Savings Account (TFSA), a fantastic vehicle that allows us to save for anything, not just retirement, and all growth is entirely tax free. Unfortunately governments the world over are also discouraging saving by setting interest rates almost ridiculously low. Even so, don’t be ashamed of saving instead of spending. Get out of debt, save an emergency fund and save for your and your children’s future; and do so knowing that it’s helping the economy more than people spending money they don’t have.
