Before consumer and housing credit became so readily available in the 1980’s and 1990’s, Americans savings percentages were at economically healthy levels, averaging between 7 and 11 percent. But after the 1986 tax reform, home equity loans became tax deductible, which provided a greater incentive for Americans to borrow. From 1990-2005, housing prices were at extremely high rates, causing more Americans to borrow than ever before, and savings percentages dropped.
After the Housing Market Crash of 2008, Americans found themselves with extremely high mortgage payments, little to no value on their homes, and next to nothing in savings. A couple of years after the Housing Market Crash, Americans slowly began to save more for fear of ending up in extreme debt or possibly losing their homes to foreclosure.
America has the lowest rate of savings of any of the first world countries. Some experts believe this is due to the America’s middle class extreme expenditures on healthcare and education, and a lack of policies insisting on financial education. Many European countries have state institutions that advise people who are borrowing money, before they get into trouble with debt. Another policy America has yet to establish is a policy that would intervene before people become “over-indebted.”
Some experts believe that in order to create a “cultural shift” and create a more financially stable economy, America must pass a federal law that would bring financial education into every education system in the country. The idea is to help young Americans understand the financial risks of borrowing and the different types of credit available to them.
To read more on this story visit: http://globalpublicsquare.blogs.cnn.com/2012/02/16/why-america-spends-while-the-world-saves/
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