Personal savings rate hits 14 year high

By Christy Hendricks

CAPE GIRARDEAU, MO (KFVS) - The personal savings rate hit a 14 year high in January at five percent.

Financial experts say it's a sign of how nervous Americans are about the economy.

"We're walking on turf that we've never see before," said Retta Penrod, branch manager of First State Community Bank in Cape Girardeau.

It would appear the economy is causing more and more people to sock money away in things like savings accounts.  Compare the five percent savings rate in January to the savings rate of 0.1 percent in January '08.  It's a trend that reflects the nervous tone of the country.

Penrod says more people are moving their money to safer investments.

"They do come in with a lot of questions on what's the safest thing to put my money in," Penrod said.

More people are socking money away in savings accounts, certificates of deposits or annuities.

Penrod says their interests rates on CD's and saving accounts at her bank are around three percent.

"They're paying close attention to it," she said.  "They want to make sure that it is safe.  That it is secure and it is protected."

Financial advisor Derieck Hodges says he's seen the same thing.  But all that saving could be a double edged sword.

"That's good that they're building up reserves, but also we have an economy that's kind of built on consumption so now, we're faced with the dilemma that people aren't going to be spending for a little while and manufacturers are hoping that they do start spending it," Hodges said.

For those close to retirement who have taken a big hit to their 401k.

"We are seeing a lot of people move their 401k into bank IRAs," Penrod said.

"I would tell people to really look at their budget and find every dollar that they can to start saving and then start considering possibly having to live on less in those retirement years," Hodges said.

For everyone else not close to retirement, Hodges suggests riding out the wave with the market, but still save as much as possible.