Exploring the Psychology of Savings

Americans actually saved more than previous estimates from other sources have shown, but their net worth has fallen by a notable amount in the third quarter, as the Federal Reserve's Flow of Funds (FOF) report, which was released last week, shows. Here, we see that the net worth of U.S. households and nonprofits fell by $2.45 trillion during the third quarter to reach $57.35 trillion, reflecting a decline in assets of $2.51 trillion, even as liabilities dipped by $61 billion. That puts total assets at $71.12 trillion and liabilities at $13.77 trillion. The third quarter saw a sharp plunge in the stock market, of course, so this 4.1% drop in net worth should hardly be surprising.

The stock market has since recovered a bit since the end of the third quarter, but I am not so much interested in how much households' assets went up or down, but, rather, what they may do in response. The psychology of savings is what interests me -- and we can also tie in consumer confidence data to get an inkling of what may lie ahead....665 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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