Saving money is a first step toward wealth.
Putting money away for the future also supports the banking system. Banks
need a supply of savings to provide money for loans.
In the United States, people who want to start a savings account have many
choices. Banks, savings-and-loans and credit unions are traditional
places to open an account.
Credit unions are cooperatives for people who are linked in some
way. For example, the members may work for a university or a government
agency. Most credit unions are non-profit organizations.
Savings are protected up to a limit if a federally guaranteed bank,
savings association or credit union ever fails. Savers have their
money guaranteed up to one hundred thousand dollars.
Banks and other financial organizations pay interest on savings accounts.
But the interest rates are low. Certificates of deposit are another
way to save. They pay higher interest rates.
With a certificate of deposit, a person agrees not to withdraw an amount
of money for a period of time. The term could be three months, or it could
be several years. Longer terms, and larger amounts, pay higher
interest. People can withdraw their money early but at a cost.
Another way to save is through a money market fund. This is a kind of
mutual fund. Mutual funds invest money from many people. Money market
funds pay higher interest than savings accounts. The money is usually
placed in short-term government securities. Money market funds,
however, may not be federally guaranteed like other kinds of savings.
In a number of countries, including the United States, people have been
saving less and less. The Organization for Economic Cooperation and
Development is a group of thirty industrial countries. A report
from the O.E.C.D. shows that in nineteen ninety Americans had a household
savings rate of seven percent.
This year, it is expected to be one-half of one percent. That is below the
other members except Australia, Denmark and New Zealand. Next year,
though, Americans are expected to save more than one percent of unspent
In Japan, the second largest economy, the savings rate in nineteen ninety
was fourteen percent. The estimate for this year and next is five