Why we save so little, spend so much, and borrow like crazy

Professor Sheldon Garon studies why Americans save far less — and spend and borrow far more — than people in most other developed countries. In comparing the last 200 years of saving and spending in the United States to Europe and Asia, he has concluded that it’s not nature or culture that makes us big spenders, but government policy and institutions.

The United States has a much weaker history of institutions that encourage “small savers” — people saving amounts that commercial banks generally consider too low to be profitable, says Garon, a professor of history and East Asian studies. Victorian England was a pioneer in creating institutions such as postal savings banks, which offer banking services at the post office to ensure that working people in financially underserved areas can earn interest in no-fee accounts. Britain also was an early promoter of savings bonds and programs to teach children how to save. Japan and several European countries sent officials to study these programs and implemented similar ones at home.

These institutions were “explicitly designed as a social mission, to encourage people to build up their household assets,” Garon says. Read more at Princeton Alumni Weekly.