Americans are saving less money than they have in nearly four years due to rising living costs, which force many families to rely increasingly on credit cards and debt to manage household finances.
According to the latest Commerce Department data released this week, the personal savings rate dropped to 2.6 percent in April—the lowest level since June 2022 and a steep decline from the 5.5 percent recorded one year earlier. The savings rate measures the portion of disposable income households set aside rather than spend.
This April reading ranks among the weakest savings levels observed over the past two decades, according to Navy Federal Credit Union Chief Economist Heather Long. “This underscores how squeezed Americans are right now with higher prices and incomes not keeping up,” Long stated in a recent social media post.
The decline followed increased household spending on gasoline and energy products, as average gas prices climbed above $4.20 per gallon amid the war in Iran. Rising energy costs have also intensified inflationary pressures. Current inflation stands at 3.8 percent, with consumer prices now increasing faster than wages for the first time since early 2023.
Federal Reserve Governor Lisa Cook acknowledged the worsening inflation picture during a recent speech Wednesday. “Inflation is clearly moving in the wrong direction,” Cook said. She added that the inflation spike was driven by temporary shocks that should, “in theory,” be short-lived.
Commerce Department figures released this week show consumer spending rose 0.5 percent in April compared with March, though much of the increase reflected higher prices rather than stronger purchasing power. After adjusting for inflation, spending increased just 0.1 percent.
The last time the personal savings rate fell below 3 percent was in June 2022, when inflation peaked at 9.1 percent and gas prices surged to $5 per gallon.
