NEW YORK–Americans are steadily spending down the savings cushion they built during the pandemic, in large part due to federal stimulus payments. For many Americans, those savings are gone.
According to an estimate by Goldman Sachs, Americans have spent down about 35% of the pandemic funds as of mid-January, and by the end of the year the company is forecasting they will have exhausted roughly 65% of that money, the Wall Street Journal reported.
Due to those government pandemic stimulus and reduced spending, households amassed $2.7 trillion in extra savings by the end of 2021, according to Moody’s Analytics’ data cited by the Journal.
“At the exact same moment you lost the government transfer payments, you got hit with very high inflation, which made your real spending power lower,” David Mericle, Goldman Sachs’s chief U.S. economist, told the Journal.
The Journal report noted that during the pandemic, Americans were socking away money at unprecedented rates. In 2020, they collectively saved 16.8% of their disposable income, well above the 8.8% they saved in 2019. But in 2022, the saving rate fell to 3.3%.
‘Struggling Financially’
The report pointed out many households are struggling financially after draining their savings last year, but Mericle told the Journal the circumstances that pushed them to do so—surging inflation and the end of government transfer payments—are unlikely to repeat.
Goldman Sachs is estimating the monthly saving rate will rise modestly by the end of the year, to about 4.5%.
Among Bank of America customers with a household income below $50,000 a year, the median balance in checking and savings accounts peaked in April 2021, according to an analysis by Bank of America Institute, a think tank within the bank whose data was cited by the Journal. Between then and November 2022, that figure fell 36%, versus 14% for customers with a household income between $100,000 and $150,000 a year.
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