Infusions of government cash that warded off an economic calamity have left millions of households with bigger bank balances than before the pandemic — savings that have driven a torrent of consumer spending, helped pay off debts and, at times, reduced the urgency of job hunts. But many low-income Americans find their savings dwindling or even depleted, the New York Times reported. Over the past 18 months or so, experts have been closely tracking the multitrillion-dollar increase in what economists call “excess savings,” generally defined as the amount by which people’s cash reserves during the COVID-19 crisis exceeded what they would have normally saved. The poorest households saw the greatest impact from stimulus, but spikes in savings faded quickly. According to Moody’s Analytics, an economic research firm, these excess savings among many working- and middle-class households could be exhausted as soon as early next year — not only reducing their financial cushions but also potentially affecting the economy, since consumer spending is such a large share of activity. In April 2020, after the pandemic’s outset, the nation’s personal saving rate — the percentage of overall disposable income that goes into savings each month — jumped fourfold from its February 2020 level to 34 percent. Some of that spike in savings resulted from government checks of up to $1,200 sent to most Americans; some simply stemmed from reduced spending by firmly middle-class or affluent households during lockdowns. The rate peaked again at 26 percent this past spring after another round of direct federal payments. But the personal saving rate doesn’t account for how those savings are distributed. Wealthy households, for instance, have saved the most. New research by the JPMorgan Chase Institute, which assesses the bank accounts of 1.6 million families, found that low-income families experienced the “greatest percent gains” during each round of stimulus, yet also exhausted their balances faster. That’s in part because those households went into the crisis with the thinnest financial buffers.
