The savings rate for Americans is on the decline, a trend that has raised concerns among top economists. Amid increased economic uncertainty, Americans, in general, are saving less.

In August, the personal savings rate, which measures the percentage of disposable income people save, stood at 3.9%. This figure is well below the decades-long average of approximately 8.9%, as per the most recent data from the U.S. Bureau of Economic Analysis.

Despite this decline in savings, consumers continue to spend, contributing to economic growth. This spending could potentially help the country avoid a recession, despite more than a year of pessimistic forecasts.
Diana Furchtgott-Roth, an economics professor at George Washington University and former chief economist at the U.S. Department of Labor, explained, "If you are confident about the future, you don't need such a high level of savings."

However, this doesn't mean that consumers are in the clear. Many are still facing significant challenges.

When the COVID-19 pandemic halted the economy, and the U.S. government injected trillions of dollars in stimulus funds, American households found themselves with substantial savings. "It was the first recession in U.S. history where disposable income increased," said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers.

However, these savings have mostly been depleted as consumers gradually spent down their excess savings from the COVID-19 years. The surge in inflation after the pandemic made it more difficult to cover expenses, and the Federal Reserve's most aggressive interest rate increases in four decades raised borrowing costs.

Philipson expressed his concerns, stating, "People are hit on both fronts—lower real wages and higher rates."

Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California, and a member of CNBC's Financial Advisor Council, added, "There are some who are working with tighter household budgets and haven't adjusted their spending significantly despite rising inflation, preventing them from saving more, even though they know they should."

A Bankrate survey revealed that nearly half, or 49%, of adults have less savings or no savings compared to a year ago. Over one-third of adults now have more credit card debt than cash reserves, the highest on record, and 57% said they couldn't cover a $1,000 emergency expense, according to another Bankrate survey.

An analysis by DollarGeek, based on data from the Fed's Survey of Consumer Finances, shows that the average American's savings are 32% behind where they should be based on their income.

Experts emphasize the importance of having a cash reserve, regardless of whether a recession is imminent. While most recommend keeping three to six months' worth of cash on hand to weather a job loss or economic disruption, this may no longer be sufficient. Preston Cherry, a certified financial planner and founder and president of Concurrent Financial Planning in Green Bay, Wisconsin, advises households to aim for twice the usual recommended amount in today's economic climate.