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Does Low Interest Rates Discourage Saving?

Sunday, June 30, 2013 - 12:35 AM
I realize that despite recent news from Bernanke, there is a fairly good chance that low savings rates are here to stay for at least the next three years. But is it possible that the low interest rates are causing people not only to not save money, but to spend more?
3
mustsavemoremustsavemore49 posts since
Jun 26, 2013
Rep Points: 152
1. Sunday, June 30, 2013 - 8:21 AM
mustsavemore:  I think people who still have any money to save or still finding a way to save it safely.  Those who are spending more or not going to let low interest rates change their habits.  They were never the savers in the first place, imo. 
2
paoli2paoli21,367 posts since
Aug 10, 2011
Rep Points: 5,992
2. Monday, July 1, 2013 - 8:10 AM
Low interest rates should create less spending and encourage more saving. Higher interest rates create more cash flow so replenish cash spent while spending with rates low means it will take longer to recoup.

However, I can see the flip side. If my money is not worth saving, might as well spend. This thinking is only looking at the short term effect and not looking at the big picture. The reality is that people that save and spend are going to do so based on their way of thinking and needs and not swayed either way by the interest rate.
4
FARFAR106 posts since
Feb 26, 2013
Rep Points: 381
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