'Paradox of thrift' is apparent in UK

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'Paradox of thrift' is apparent in UK

More people are putting money aside and this situation is bringing about a problem called the paradox of thrift, says an industry commentator.

David Kuo, director of Fool.co.uk, explained that if people are saving all their money and not spending anything then the recession could last longer.

He commented that two-thirds of the UK economy relies on people spending cash at restaurants and in the high street rather than putting it away in savings accounts.

"If people are saving money rather than saving it, then it can have the opposite effect and can prolong the recession itself," said Mr Kuo.

Accepted wisdom is that people should put aside six to nine months of household expenses, as this will see people through an economic downturn, he added.

Mr Kuo's remarks were made following the release of the Nationwide Savings Index for September, which saw an increase of ten points to 87, while the Importance of Savings Index went up five points to 91.

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