The savings rate of the average American has dropped to its lowest level since 2022. According to the Federal Reserve Bank of St. Louis, the average person is saving only 2.6 percent of what they have left after taxes. At the same time, households are carrying record debt.

This low savings rate is worrying investors, including Albert Edwards, strategist at Société Générale.

• Edwards explained in a note to clients last week that U.S. consumers are saving less and borrowing more because of the “wealth effect”—they feel richer because the value of their homes and of their stocks is high.
• He warned that saving less and spending more right now is risky because home and stock prices are inherently volatile and can drop quickly.

“The U.S. consumer currently resembles the Wile E. Coyote character, running off the cliff and suspended in thin air briefly, before collapsing,” Edwards said. “It doesn’t take a Fed PhD economist to tell us that if the U.S. saving ratio stops falling, consumer spending will grow in line with income, which is falling.”

U.S. household debt reached a record $18.8 trillion in the first quarter of 2026, according to the Federal Reserve Bank of New York. This works out to $140,000 to $155,000 in debt per household.

• About 70 percent of this household debt is mortgage debt, 9 percent is auto loan debt, 9 percent is student loan debt, 7 percent is credit card debt, and 5 percent is other types of debt.
• This debt level, though high, is not necessarily unsustainable if a household has financial reserves to weather an emergency. But many families have no such reserve. Lending Tree surveys indicate that the average household is on the hook for $1,600 in debt repayments each month, yet the average person is only saving $148 per month.

This is what has strategists like Edwards concerned. Roughly one third to one half of Americans do not have enough cash to cover a $1,000 emergency expense.

• An economic downturn could be devastating for both them and the overall economy, since consumer spending makes up around 70 percent of U.S. gdp.

Proverbs 21:20 says, “There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.” Based on this wisdom, Solve Your Money Troubles! recommends setting aside 5 percent of your earnings until you have accumulated six months’ worth of emergency savings.

Many Americans are instead maxing out their spending capacity on the assumption that they can always tap home equity or stock portfolios. When the next downturn arrives, many will learn the hard way why this is unwise. Many people need to reduce their standard of living.