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A penny earned is a penny spent

Credit used to be only for durable items - homes and cars. Now credit supports American lifestyles. No wonder savings hit a historic low. What can be done?

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If Americans could be divided into savers and spenders, Courtney Davis knows exactly where she would fit. "I am a spender, through and through," she says. "I see how much is in my account, and that is how much I have to spend on a new outfit, a night out, or a great meal."

But last month, Ms. Davis, a manager for a Boston think tank dealing with food issues, grew tired of having nothing in the bank. A broker arranged to have 20 percent of her salary deposited automatically into savings and investments. As she says, "It's the only way I can save, by not even getting a chance to get my mitts on it."

As a nonsaver, Davis has plenty of company. Americans' personal savings fell to -0.5 percent last year, the first time since the Depression that the savings rate has been negative for a year. Although that is just one measure of economic stability, it reflects how irresistible consumerism has become in the American psyche.

"Other countries are not wrapped up in consumption as much as we are," says Larry Frank, author of "Wealth Odyssey." "They like to have nice things, but it doesn't seem to be the benchmark where society is measured as a success. Having something saved is also part of that benchmark in other countries."

A new report from the Federal Reserve bank finds that only 41 percent of Americans save regularly. Three-quarters of households carry debt.

Americans' long journey on that road to debt began gradually after World War II.

"Baby boomers' parents had access to credit, but in a responsible way, using it to buy durable goods - a house, a car, a washing machine," says Shira Boss, author of "Green With Envy: Why Keeping Up With the Joneses Is Keeping Us in Debt," to be published in May. "As baby-boomers grew up, they gradually started to see debt not as a way to get these durable goods but as a way to increase their lifestyle. They started sacrificing any future security for present-day comfort and entertainment."

In 1981, Ms. Boss says, families saved an average of 11 percent and owed 4 percent of their income on credit cards. By 2000, the average savings rate had already fallen below zero, and credit-card debt had gone up to 12 percent of income. Today, she says, "boomers have a bigger problem with debt than anyone else. Half of them do not have a retirement account."

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