Thanks to the government’s giant stimulus program, many Americans seem to be feeling a little better about their finances. Despite rising unemployment, personal incomes still rose 1.6 percent in May, according to the Commerce Department. But instead of heading back to the mall with that extra cash most Americans are making a beeline for the bank.

The U.S. savings rate recently reached 7 percent of disposable income – the highest it’s been since early 1990s. In the short term, such penny-pinching could delay economic recovery by suppressing demand. But in the long run it’s a good thing. It means families are working to reduce high debt levels, rebuild retirement accounts, and be better prepared for financial emergencies without resorting to unsecured personal loans.

Interest rates are down

Unfortunately, interest rates on most savings products are currently very low. Interest on savings accounts typically tracks the Federal Reserve’s funds rate, and right now that’s hovering between zero and 0.25 percent—its lowest level ever. One-year bank CDs are a slightly better option, recently yielding about 2 percent on average. Think twice, though, before committing to any period longer than that. “Short maturities give you the ability to reinvest so you can continue to stay ahead of inflation once rates and inflation perk up,” says Bankrate.com’s Greg McBride.

Treasury Inflation-Protected Securities are an attractive option over the longer term. Uncle Sam pays a fixed rate – recently 1.25 percent – plus an “inflation kicker.” If consumer prices go up, your principal will be supplemented.

Slightly higher online

A few banks are paying decent interest on checking and savings accounts, but you have to play detective to find them. Many smaller banks offer “rewards” checking accounts yielding 4 percent or higher in order to attract customers. But as Daren Fonda said in SmartMoney:

Does that make them a good deal? That depends. You can usually find a slightly better rate online, especially at one of the Internet-only banks that don’t have to pay tellers or other branch expenses and can pass on the savings. But the gap has narrowed as Internet banks have started to focus more on profitability than growth. “We’re getting as much money as we need,” says James Kelly, chief operating officer of ING Direct, the largest online-only bank, explaining why ING’s rates aren’t higher. Indeed, ING is now trying to get customers to branch out from basic savings to other services such as checking accounts and mortgages.

There’s only so much banking you can do with the click of a mouse, though. Most online-only banks have limited services, so you have to go elsewhere for extras like lines of credit or auto loans. Firms like ING Direct and Discover Bank don’t have their own ATMs, and customers may be charged fees if they want to withdraw cash from another bank’s ATM. Cashing a check can also be a hassle with a branchless bank. Customers either have to go through a traditional bank or mail in the check.

Could this little piggy bring the economy crashing down? I don't think so.

While it’s true that more people are relying on cash advances now, there are also a higher number of people stashing money in their savings accounts.

I will be the first to admit that when I read the headline “Why Saving is Killing the Economy,” I rolled my eyes.

Sensational saving skeptics

Call me cynical, but I just have a hard time believing that hard-working Americans stowing $20 out of their paychecks is “killing the economy.” For one thing, some would argue it was already dead.

I completely understand that consumer spending is key to supporting a thriving economy. But given the fact that more and more people need cash advances, I’d say we need not look at low- and middle-income Americans as the culprits in this “saving crisis.”

Show me the money

All that’s happening is people aren’t spending money on things they don’t need. Yes, that does mean businesses that deal in frivolity run the risk of going under. Or maybe they just need to market their frivolousness to a different market.

Will Smith is "Hollywood's Most Valuable Actor." I say: Smith, get to shopping!

What about all of the actors, athletes and big business owners who have millions, if not billions, stowed away? I think if Paris Hilton went on a major shopping spree it’d make a much bigger difference than me emptying my $100 savings account.

Keep your money

If you’ve got a few dollars tucked away as a cushion, it’s not going to save someone’s job if you spend it. Buy what you need. That’s enough. The economy did very well in the ’50s when the savings rate was between 8 and 10 percent. Right now it’s at 3.6 percent.

Economists are saying that if everyone suddenly begins saving 10 percent of their income we’ll have a real problem. Call me crazy, but going from “People are saving 3 percent of their income,” to “Prepare for the worst! Everyone is about to start saving 10 percent!” is a bit extreme.

Wrapping up

To summarize my point, I understand that consumer spending will help the economy. But it frustrates me when I read headlines that say “saving is killing the economy.” It’s just so sensationalistic — kind of like when cash advances and payday loans are referred to as “predatory lending.”

Americans are already sticking their extra cash in the bank

It seems people in the United States are starting to learn their lesson, or trying to avoid needing another payday advance loan. The personal savings rate rose in December to 3.6 percent, the highest it has been since Americans got their stimulus checks last year in May.

The main contention congressional leaders have with the economic stimulus plan, currently under review by the Senate, is that the $500 tax credit for individuals will not help the economy. This pattern, Americans putting more money into savings paired with the fact that most stimulus checks last year seemed to be tucked away, presents some compelling evidence.

Will stimulus make a difference?

It’s true that the $500 tax credit is a different animal from the $300 to $600 stimulus checks individuals received last year. The $500 Obama is proposing would come to individuals gradually by taking just a little bit less out of each paycheck over the span of the year. Maybe for some this will mean they don’t need a payday advance loan, but the amount is so small it’s doubtful.

On one hand, it’s much easier to put money into savings when you get a chunk of it all at once, hence the jump in personal savings last May. Individuals might be more likely to spend the extra few dollars per paycheck because they think sticking a small amount into savings won’t make a difference. However, people are already saving more money rather than spending it, even without the extra help from the government. I’d say those who argue the tax credit won’t boost spending have a point.

Weigh in

So, if this bill passes with the tax credit in place, what will you do with your extra few bucks? Will you order a pizza once a month or get an extra shot of espresso in your latte? Or will you tuck it away in case of an emergency in order to avoid needing a payday advance loan? You can leave your comments below.