COVID-19 Leaving Americans With Little Savings: Financial Security Tips to Protect Your Financial Well-Being
By The pandemic has had a profound effect on the financial well-being of many Americans. As of mid-January 2021, the extra money they accumulated during the pandemic had been spent down by 35%, according to an estimate from Goldman Sachs.[0] By the end of the year, the firm projected that households will have spent roughly 65% of that money.[1] The inflation rate has caused many to dip into savings accounts to offset the loss of purchasing power, which is evident in the 17% of disposable income saved in 2020, as compared to the 3.4% saved in 2021.[2]
In January 2020, the personal saving rate of U.S. citizens was 9.1%, according to data from the Federal Reserve Bank of St. Louis.[1] This spiked to 33.8% in April 2020 during the COVID-19 breakout.[1] By the end of the year, the rate had dropped to 13.8%, but it soared to 26.3% in March[1] But since then, there has been a one-way decline with no major increase.[3]
The heavy toll of today’s cost of living is still eating into Americans’ monthly budgets.[4] David Mericle, Goldman Sachs’s chief U.S. economist, noted that “[a]t the exact same moment you lost the government transfer payments, you got hit with very high inflation, which made your real spending power lower” as reported by The Wall Street Journal.[5]
The savings cushion that many Americans built up during the pandemic is quickly depleting as they battle with high inflation.[0] The overall savings rate has dropped below pre-pandemic levels, to its lowest in almost 15 years.[3] This is leaving some households with no savings buffer at all.
It is essential that people take steps to protect their financial security and build a cushion of savings to help them weather economic uncertainties. It is also important to stay informed on the latest developments in finance and economics, to be able to make informed decisions.
0. “Households Burn Through What's Left of Their Pandemic Savings” The Wall Street Journal, 6 Feb. 2023, https://www.wsj.com/articles/once-flush-savings-accounts-are-starting-to-run-dry-11675691637
1. “Americans burn through pandemic savings as high inflation pinches” msnNOW, 9 Feb. 2023, https://www.msn.com/en-us/health/health-news/americans-burn-through-pandemic-savings-as-high-inflation-pinches/ar-AA17iWwe
2. “Consumers Scramble to Cover Expenses as Savings Dwindle” PYMNTS.com, 7 Feb. 2023, https://www.pymnts.com/consumer-finance/2023/consumers-scramble-to-cover-expenses-as-savings-dwindle/
3. “US Households Burn Through Pandemic Savings; High Inflation Saps Spending Power” The Epoch Times, 8 Feb. 2023, https://www.theepochtimes.com/american-households-burn-through-pandemic-savings-lose-spending-power-amid-high-inflation_5042428.html
4. “Inflation is taking a toll on America’s 401ks and retirement plans” Fortune, 8 Feb. 2023, https://fortune.com/2023/02/08/americans-saving-less-retirement-withdrawing-from-401ks-inflation
5. “U.S. Consumers Tap Into Pandemic-Era Savings” NACS Online, 8 Feb. 2023, https://www.convenience.org/Media/Daily/2023/February/8/3-Consumers-Pandemic-Era-Savings_Operations
