Saving money is in vogue again

Saving money is in vogue again.
The latest numbers from the U.S. Department of Commerce show that the personal savings rate -- that is, savings as a percentage of disposable income -- rose to 2.9 percent in the fourth quarter of 2008. That's the highest level in six years.
That translates into more money being saved in banks, in a variety of ways, including plain-vanilla savings accounts, money market funds and certificates of deposit. Money parked in CDs at banks nationwide was up 5.9 percent in December compared with a year earlier, according to the Federal Reserve Bank.
Increased savings aren't coming solely from consumers reining in spending because of a recession-induced crisis of confidence. Some people are liquidating their investments in stocks and bonds and moving their money to safer havens, said Greg McBride, senior analyst at Bankrate.com.
The hike in savings would be even more pronounced if consumers weren't paying off their debts at the same time. In addition, people who have lost their jobs are taking money out of their savings. Still, the new savers are a welcome development for financial institutions.
"Especially because of the need for many banks to replenish capital, consumer deposits are particularly attractive," McBride said. "Consumer deposits are the lifeblood of the banking system."
At Wachovia, the amount of money the bank's customers put into money market accounts grew almost 5 percent in January.
"That is huge for one month," said Kathryn Black, Wachovia's savings director.
Some banks are offering new products aimed at those savers.
SunTrust, for instance, recently launched a savings account designed to attract people who are saving more, and spending less, in response to the recession.
The Get Started Savings program is aimed especially at people who aren't in the habit of saving. No minimum account balance is required as long as you automatically transfer at least $10 each month from your checking account to a savings account. And at the end of the first 12 months you receive a one-time bonus: 2 percent of your savings, up to a maximum of $50.
"It's a product that ... we think will give people an incentive to save and reward them for saving," said John Stallings, who heads the Central Carolinas region for Atlanta-based SunTrust.
Other banks have introduced special savings programs over the past several years. Bank of America started its Keep the Change program in 2005. It automatically rounds up to the nearest dollar every purchase made with a Bank of America debit card and deposits the "change" into the customer's savings account at the end of the day.
In January 2008, Wachovia launched Way2Save, a savings account designed for first-time savers. Among its features: Every time a customer uses a debit card, $1 is automatically transferred from the checking account to the savings account. It also pays a 5 percent interest rate the first year and a 5 percent bonus at the end of the first 12 months, up to a maximum of $300.
Since its inception, 1.6 million Way2Save accounts have been opened, far exceeding the bank's expectations.
"I feel like savings accounts in banks have become a lot cooler," Black said.
McBride urges consumers who are in savings mode to shop around for the best interest rate because rates vary considerably from institution to institution and from one type of savings account to another.
(E-mail David Ranii at david.ranii(at)newsobserver.com)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
Must credit The News & Observer of Raleigh, N.C.