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Chart of the Week: Personal Savings Rates Crater While Bank Deposits Soar

Author: Tim Sharp

Researcher: Jack Williams

Published: January 31, 2023

The relationship between personal savings rate and checking deposits is an important aspect of finance. Personal savings rate refers to the percentage of one’s disposable income that is saved, while checking deposits refer to the money held in a checking account.

A high personal savings rate is an indicator of financial discipline and stability. It means that a person is able to control their spending and save a significant portion of their income. A high savings rate also provides a cushion for unexpected expenses and can be used as a source of funds for large purchases, such as a home or a car.

Checking deposits, on the other hand, refer to the money that a person holds in their checking account, which is accessible and can be used to pay for everyday expenses. Checking deposits provide convenience and security.

A dwindling savings rate, as seen above, shows people are finding it harder to save a portion of their disposable income, whether this is due to the prices of goods rising with inflation, changes in lifestyles since the pandemic or stagnant wages. Inversely, high checkable deposit rates, as shown above, could mean people feel generally uncertain about spending in this period of time. Again, this is further shown when looking at consumer confidence which remains near to historical lows in both the U.K, Eurozone and USA.

These three data points, checking deposits, savings rates and consumer confidence, are being watched eagerly by investors at the moment. If consumer confidence picks up, perhaps the dam of savings accrued by individuals since the pandemic, and yet to be spent, could make its way into the economy. While on the other hand, if savings rates tick up, this could mean wage growth translating through to the general population which would mean for a healthier consumer and in turn perhaps trickle down into the economy.

 

Data & Charts – Refinitiv Data, Bloomberg Data, Gemstock Data, Gemstock Fund, Statista Inc. 2023

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