For years, economists have lamented low savings rates in the U.S. as potentially causing the downfall of the nation's economy. Yet while those criticisms may have made sense in past years, current levels of saving shouldn't surprise anyone -- and given the attitude that many policymakers seem to have, savings rates likely won't go anywhere but down for some time.

What goes up must come down
From one perspective, Americans have done a good job recently of increasing their savings. As fellow Fool Morgan Housel recounted a couple months ago, savers in the U.S. boosted their savings rate from a minuscule 1% all the way to 7.5% when the recession hit -- a huge move that amounted to between $600 billion and $700 billion of additional savings.

Given the big rise in consumer debt levels during the early part of the last decade, that fiscal retrenching was much needed. But now, even though the economy hasn't recovered very strongly, the savings rate has moved back down again, hitting its lowest level since December 2007 at 3.6%. Some economists see that as a sign that people are getting back into old, bad habits of overconsumption.

A case of simple supply and demand
But before you panic and decide that the U.S. economy is moving back to the reckless, overleveraged days of the housing boom, take a step back and consider the current environment that savers face. In particular, savers have to face an increasingly unattractive set of options in setting aside their cash:

  • Savings accounts pay next to nothing, and even the best of a bad lot are paying less. A recent check of rates showed that only American Express (NYS: AXP) managed to get even to 1% on its savings accounts, while the banking subsidiary of AIG (NYS: AIG) only pays 0.85%.
  • Even if you're willing to lock up your money for five years, it's tough to find banks paying a 2% rate.
  • Rates on Treasury securities are even worse. Six-month Treasury bills pay a whopping 0.05%, while a five-year Treasury note carries an interest rate well under 1%.
  • Savers seeking income of 4% or more -- the kind of income they routinely earned from bonds and bank CDs before the financial crisis -- have had to resort to buying dividend-paying stocks. Yet while shares of several high-quality companies, including Altria (NYS: MO) , Vodafone (NAS: VOD) , and Pfizer (NYS: PFE) , currently meet that standard, savers are rightfully concerned that investing in the stock market doesn't give them the stability they'd prefer from the less risky side of their overall portfolio.

Of course, if you still have credit card debt, the best return you can get is to pay it off. With double-digit interest rates on most credit cards even for cardholders with good credit ratings, you can't match the return from paying down your credit card balance anywhere else.

But once your cards are paid off, what comes next? Right now, the current rate environment is rewarding those who are reckless with their money, encouraging borrowing -- at least for those who can get a bank to give them a loan.

The (not so) easy fix to bring back saving
If you want people to save, the solution is simple: Give them more incentives to do so. While low interest rates encourage ordinary people to take on risks they shouldn't, higher rates reward them for being prudent with their money. Sure, paying higher interest rates may not be good news for companies like Annaly Capital (NYS: NLY) and American Capital Agency (NAS: AGNC) , which have made big profits in part by borrowing massive amounts of capital at the same low rates that savers have had to accept. But if we truly want the American public at large to manage their money better, putting up huge obstacles to saving simply isn't the right answer.

Dividend stocks may not be the answer for savers, but to long-term investors who are willing to take on risk, they're a goldmine. Check out the Fool's brand new special free report to see our picks for 11 rock-solid stocks that pay great dividends.

At the time this article was published Fool contributor Dan Caplinger has always been a saver. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Altria and Annaly Capital. Motley Fool newsletter services have recommended buying shares of Pfizer and Vodafone, as well as writing a covered strangle position on American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy wants you to know everything.

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