5 savings strategies for the new normal

By Richard Barrington

Economic growth stalled yet again in the second quarter of 2012. If this is starting to seem like a familiar pattern, then perhaps it's time to adjust your savings strategies to the new landscape.

The advance estimate of real Gross Domestic Product from the Bureau of Economic Analysis was 1.5 percent, down from 2.0 percent in the first quarter. The Great Recession ended three years ago, but since then any flashes of momentum have quickly dissipated. The economy has not slipped back into recession, but slow growth has become a dominant theme.

If slow growth is the new normal, then here are five ways you can adjust your savings strategies:

1. Become an active rate shopper

Rates on savings accounts, money market accounts and short-term CDs are approaching zero. You have to live with the fact that all rates are low right now, but don't assume they are equally low. The FDIC reports that the average savings account rate is down to 0.09 percent these days, but you can still find rates much closer to 1 percent if you shop around. If interest is already scarce, why accept less? Take a look at online savings accounts, which often take advantage of their lower overhead to offer higher rates.

2. Allocate your savings tactically

People often lump their savings into one catch-all savings account. However, if you know you won't need all that money in the near term, why not get a little bit better rate by putting some of it into a long-term CD? This won't raise the risk exposure of your savings, but it could earn you a little better income. In particular, look for a long-term CD with a competitive rate and a relatively low penalty for early withdrawal.

3. Raise your personal savings rate

In simple terms, the nest egg you are building is the money you save multiplied by some rate of return. Mathematically, if rates of return are lower, the rate at which you save money has to increase in order for you to reach the same goal. With interest rates near zero and a persistently shaky stock market, it's fair to say rates of return aren't what they used to be, so personal savings rates have to pick up the slack.

4. Never pay full price

You know it's a slow economy, and so do retailers. That means the buyer should have the upper hand, and this is especially true in the highly-competitive age of Internet sales. Most items you want to buy are on sale somewhere, and if they aren't now, they may be soon.

5. Don't be the first in line

A modern marketing technique, perhaps best exemplified by Apple's product launches, is to turn the introduction of new products into events, with people coming out hours -- if not days -- in advance to be the first in line to get the latest gizmo. Here's a tip: The front of the line is for suckers. Given today's highly compressed product cycles, it's usually not long before that new gizmo will be on sale, as the retailer clears the shelves for the next big thing.

It's hard to enjoy a slow growth environment, but think of your reaction to it in terms of economic Darwinism. Whoever adapts best to this new environment is likely to be most successful.