My wife and I have saved about 30-45% of our combined income since we started working which was about 5 years ago. 15% goes to 401k, 15% goes to a Roth IRA and 15% goes to the bank and/or brokerage account to save for a down payment on a house.

I don't really see any reason to change that unless our situation changes drastically, such as a layoff or if we actually pull the trigger and buy a house which is unlikely since we're not crazy about the area in which we currently reside.

Actually, that's my general point: the link between savings and investment is broken because the financial system is currently dysfunctional, and an increase in savings becomes demand destruction.

I think the Keynesian argument is that the link between savings and investment is generally very weak (so we have a paradox of thrift and a decline in aggregate demand), whereas the counterargument is that the link is generally very strong (in which case, additional savings would be quickly invested and would maintain aggregate demand). Right now, with the problems in the financial system, we're going to be closer to the Keynesian argument than not. Whether Keynesian remedies would work in a post-industrial economy is a different question.

@Oranges w/ Cheese: Same here. My checking account seems to shrink every month while my savings grows. At 23 I think I'm doing a pretty good job at learning how to save successfully. I have 3 savings account in total. A CD=emergency fund, a "savings" linked to my checking account=overflow for when I go over my monthly spending plan, and a real savings account at a bank separate from my checking account and checkcard which money automatically deducted from my paycheck goes into and never comes out. I also put money away each month into a Roth IRA (right now known as the toilet) as retirement savings until I find a full time job with benefits.

That right now is my emergency fund as well. The time or two I have been caught short right after rent is due (yes it's my own fault for not tracking spending closely) whatever money I have had to pull from savings to cover expenses is immediately replaced when I get paid again. For once my savings is actually growing because I am paying more attention.

@Saboth: And I thought my job sucked.

you should check out mint.com , they constantly update you with savings and credit rates in comparison with your current accounts.

you should check out mint.com , they constantly update you with savings and credit rates in comparison with your current accounts.

what cost of living raise?

@Islandkiwi: I use igobanking.com it's where I shift all my spare cash. My checking account doesn't earn interest so I keep the minimum in it since I'm moving money all the time.

I figure since it's for savings it doesn't have to be an account where I can hit any ATM in the country without fees. That'd be nice but it's not necessary since I'm not withdrawing from it regularly.

@cc82:

Ing has consistantly disappointed me ever since they decided to focus more on mortgage loans than savings. I dropped them a long time ago.

Try [www.dollarsavingsdirect.com]

There are also banks that have amazing interest checking rates (I'm talking almost 6%!).

Check here for them... [www.highyieldcheckingdeals.com]

As soon as my next cd expires... I will be moving my money to a high yield checking account.

I put most of my savings into a 2 year cd making nearly 4% (3.92%) when consumerist warned that interest rates were about to drop. Not two weeks later it did.

@Saboth:

0.9% as of today.

My employer usually does that too, but they have been greedy bastards the past few years. They recently cut their 401k contribution from 5% matching to 3%. They laid off a few people, and they have one of the worst health insurance plans that is legally available. So you'd think they were doing poorly in this economy? Nope, they've steadily made 1-2 million more every year for the past 5-6 years. Our costs remain the same (mostly), and they are making millions more. Then they use the economy as an excuse to cut costs further. Seems the more they make, the greedier they are, and don't realize it is the hard work of their employees getting them there.

Probably a good idea. When you look in your checking account and see $3,000, you think "Hmmm well rent isn't due for another 2 weeks, maybe we CAN afford a PS3 and new tv after all".

I used to like putting money in with paypal's money market. It was almost 5% at one time, now it's almost 0.

The problem isn't that there isn't enough money, the problem is that banks don't lend money to others with enough volume, something 5 % more or less saving by the consumer can't and doesn't influence.

Of course now you could say that the money saved would otherwise go into the stock exchange - but with a Dow dropping below 7000 today I rather doubt this and I pity the suckers who thought they could time the market last month or even last year because "it has hit bottom now".

@joe.glass: Some employers, like mine, give you a cost of living raise each year to offset inflation prices and to keep up with the increasing costs associated with the city you live in. Ours is around 3.5%. Not much to get too excited about, but it helps out a bit.

People are saving money because the current thought is that prices will still decline coupled with tight credit markets.

That's exactly what happened in Japan during the lost decade.

We're in savings overdrive right now. Not just to sock away money for emergencies and such, but also putting together a down payment for a house (we are hoping to be ready soon - sometime this month my department may get hit with layoffs, and my husband just came out of a layoff as well so we are sitting tight for now). It has indeed made a dent in our disposable income, but hopefully we'll be able to put some of that cash back in circulation soon if all goes well.

I guess this is the inevitable result of the Fed pushing down rates, combined with the ongoing flight from equities. IANA economist or investment guru, however, so maybe it's just due to Solar Cycle 24.

@Applekid: Agreed, that gave me a much-needed smile

I've been socking away money instead of buying crap. I just got my annual raise (crappy compared to last years raise) and pretty much its all going into my savings account.

Over the long term, this is a good and necessary change, but we're going to have a lot of short term dislocation.

I'm working more AND buying less crap. TWO votes FTW!

Look at reward checking accounts if you're willing to do a little extra footwork each month for a much better rate. Otherwise, take your pick of online savings accounts.

@JGKojak: "Given the way these crooks have managed the financial industry, its lucky we haven't had a run on investments."

Uh, we have. That's why the Dow just dropped below 7,000 for the first time since 1997. Yes, a lot of this is just the gross incompetence on display in Washington at the moment, but that's not the only reason investors are cashing out all their investments.

@t-r0y: And how! You forgot you're also going to be stuck paying for bailouts of corporate failures (GM, Chrysler, etc.) and interest on the government's trillion, two trillion or whatever of "stimulus" and other new spending. This is going to hurt for a long time.

Uh-oh- the Wall Streeters won't be happy with all of us actually SAVING our own money.

I find it amusing that the same people who get bent out of shape over marginal tax increases seem to believe they own the right to everyone's extra money- and when people don't invest, they act like its treasonous. Given the way these crooks have managed the financial industry, its lucky we haven't had a run on investments.

I'm saving/investing the same amount as usual.

I don't think it counts as saving just because the account is called a "savings account".

My savings is with ING Direct, buth they've been dropping their interest rate every month. Down to 1.835 now.

Now that's still amazing compared to my local bank, but anyone have a better place to stash savings?

My checking account is steadily getting smaller whilst my savings gets bigger, pretty much.

Woo, not paying bills = savings!

"LOL, I'm Not Paying My Mortgage"

A+