Are we scared stingy?

Patricia Hamilton-Marsh of Omaha is among the masses who have pushed the nation's savings rate to its highest level in more than 15 years.

Like everyone else, she has watched job losses mount and the stock market plummet, then flounder.

A cash cushion provides at least some comfort.

That's why Hamilton-Marsh, who works in product development at Godfather's Pizza, and her husband, Karl, an executive chef at Omaha Steaks, have doubled the cash they hold in an emergency fund to about $18,000. They figure that is enough to cover expenses for about six months instead of three months if both lose their jobs.

“If someone gets laid off it's taking longer for them to find a new job,” she said.

The couple aren't alone in being scared stingy. The country as a whole is socking away more money, sending the nation's personal saving rate from around zero the past several years to 6.9 percent of disposable personal income in May, the latest month for which figures are available.

That's the highest level since December 1993.

That kind of saving is good for individuals. But the irony is that it might not promote a speedy national recovery from the recession.

Pumping up their cash cushion isn't the only step Hamilton-Marsh and her husband have taken.

They pay off their credit card bills every month so they don't pay high interest rates on the debt. That was a tip the couple learned in a financial wellness course they took two years ago through Godfather's.

They stopped buying things on a whim.

“My husband wants a new racing bike (motorcycle),” Hamilton-Marsh said. “Instead of pulling cash out of our liquid fund we ask, ‘Is it a must have?' If the car breaks down, it's a must have.”

Buying a racing bike, on the other hand, has been postponed until at least Christmas, she said.

Consumer spending accounts for roughly 70 percent of overall economic activity in the United States. Reduced spending means fewer sales for companies that turn the wheels of commerce.

Financial advisers like Jerry Egermier, president of Egermier Wealth Management Group in Omaha, and Shawn Macken of Waddell & Reed in Omaha said they have witnessed dramatic changes in people's attitudes.

“The need to save and have reserves is at an all-time high,” Macken said. “It's amazing what the fear of losing a job will do to people's desire to have more money lying around.”

Scott Darrah, a financial adviser with Ameriprise Financial Services in Council Bluffs and Nebraska City, repeated the truism that certainly is true today, for individuals and businesses: Cash is king.

“Saving has replaced retirement as the No. 1 concern,” Darrah said.

Ernie Goss, economics professor at Creighton University who conducts monthly surveys on the region's economic outlook, said several factors have pushed the savings rate higher:

— People are uncertain about the economy and fear they could lose their jobs.

— The population is aging, and people typically save more as they get older.

— Downturns in the stock market and housing market (and home values) have people scrambling to repair the dents in their net worth.

Even attitudes toward spending have changed, with conspicuous consumption increasingly frowned upon, Goss said.

The savings rate will decline as the stock and housing markets recover, Goss said, but it probably won't fall to the low levels seen before the recession.

In the 1980s, the nation's personal savings rate averaged 9 percent; in the 1990s it averaged 5.2 percent.

But between 2000 and 2005 it averaged about 1.9 percent, and in April 2005 it hit negative territory for the first time since 1933, according to the Commerce Department's Bureau of Economic Analysis.

The rate was a negative 0.7 percent from April 2005 through June 2005, which meant people were spending more than they earned in those three months. How? Primarily through the use of credit and borrowing, including against their home equity.

The savings rate hovered just above zero through 2006 and 2007 before climbing to 2.5 percent in last year's second quarter.

In the first three months of this year the personal saving rate was 4.3 percent. It shot to 5.6 percent in April and 6.9 percent in May.

Many financial experts believe this is a good long-term trend, that the economy will be fundamentally stronger over the long haul if people save more and spend within their means.

“It's healthy in the long term, but it hurts in the short term,” Egermier said.

Contact the writer:

444-1117, joe.ruff@owh.com

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