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So many expenses, so few dollars saved. That’s the dilemma faced by millions of Americans – everyone from struggling college students to young families saving for a down payment to baby boomers approaching retirement.
During severe recessions, people tend to curtail spending and increase saving as a hedge against potential – or real – hardship.
In fact, the average personal savings rate as a percentage of disposable income has risen to about 5 percent, compared to an all-time low of negative 0.5 percent in 2005. Back then, the economy was booming and many people assumed that the stock market and home values would climb indefinitely.
How wrong we were.
It’s probably too early to tell, but some worry that the strong 2010 holiday shopping season may signal a return to old spending habits.
Here’s hoping we’ve learned our lesson about living beyond our means and the importance of saving for a rainy day. There are many reasons why it’s important to develop and maintain sound savings habits during good times and bad:
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