POLICY BRIEF: Personal and Family Savings

Personal and family savings enhance American economic prosperity by supplying the investment capital that is necessary to ensure long-term economic growth and job creation, while reducing dependence on more volatile sources of capital such as lending by foreign central banks. Equally important, savings are essential in achieving milestones across the entire lifecycle of individuals and families, from seeking higher education, to homeownership, retirement and the accumulation and transfer of wealth to the next generation. Savings enables entrepreneurship and other forms of investing for the future. A broad culture of personal and family savings and the public policies to support it are vital foundations of an Opportunity Economy and the health of the American Dream. Still, despite its essential role in the economy, personal savings has been declining over the past two decades, reaching a negative rate at the end of 2005, the lowest since the Great Depression. Moreover, such negative savings have been most pronounced in the bottom half of the income spectrum, risking the emergence of a two-tiered system in which wealthy and upper middle class Americans benefit from savings and investment, while working class and poor Americans largely do not.