Saving is back. Turn on the TV and you are hit by one ad after another telling you how good it is to save. Saving has replaced retail therapy as the most fun you can have with your clothes on.

Okay, maybe saving isn’t that good, but Brits are waking up to the joy of seeing their money grow through the magic of compound interest. Or to be more accurate, thanks to rock bottom interest rates, gaining pleasure from saving has a hint of masochism about it. There isn’t much magic in compound interest, when the official bank rate is 0.5 per cent.

Why, getting fun from saving when rates are that low is positively kinky.

In truth, it is not so much that Brits are enjoying saving, but they have woken up to the fun of seeing their debts reduce.

And in a nut shell, savings and debt tell us what is really going. And what is rather good, is that we have got some good gen for you on this topic

Take this comment:

“In the third quarter of 2009,” said the National Institute of Economics and Social Research (NIESR) earlier this week, “the household saving ratio rose to 8.6 per cent as households continued to repair their balance sheets. Gross personal sector saving in the year to date is already over three times that seen in 2008, and we expect the figure to rise further in 2010.”

Apparently, Brit’s debts peaked in the third quarter of 2008. And have been declining since.  “In total,” says NIESR “households have reduced their outstanding debt by £26.5 billion. The reduction in outstanding household debt while incomes continue to rise has lowered the debt to income ratio of households.” Then we get a hint of optimism from NIESR, “We expect the ratio to fall further through this year,” it said. But then came the killer: “however, as it only returns the ratio to 1.5,which is the same level as in 2005, UK households will continue to have the highest debt to income ratio in the G7.”

And that in a nut shell is the problem. The UK is in debt. It is not just public debt, that’s bad, but there is no shortage of other G7 economies where the problem is just as dire, if not worse. But in the UK, unlike say Germany and Japan, consumers are in debt too.

Apparently, from 2000 your average Brit paid out more money in interest payments than he or she received. But here is a rare bit of good news. The fall in interest rates has changed it all. Both interest payments and interest receipts have fallen, but interest payments have fallen faster than receipts. NIESR says “net receipts have surged upwards, boosting income growth through the recession.”  In other words, the change in this interest payments come receipts equation is boosting income growth. In fact, says NIESR “ in the third quarter of 2009, this contributed 25 percentage points to the annual rate of income growth.”

Real wages have been falling, that is to say inflation has been outstripping wage inflation. This has hit our affordability hard. But the effect of falling internet rates seems to have outweighed this. According to NIESR “real disposable income is estimated to have grown by almost 4 per cent in 2009. “ And that’s the most robust growth rate since 2001.

Alas, NISER doesn’t see this continuing. It says that the expected rise in price inflation this year will hit real disposable income, and knock around 1 ½ per cent of that. Tax increases are expected to knock another 1 ½ per cent of real disposable income.   All in all, that leaves a growth rate in 2010 of real disposable income of just 1 per cent.