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At the beginning of the COVID-19 pandemic, Americans were saving more money. This is not surprising given the fact that many common spending areas, such as travel and dining out, have disappeared. The government also offered stimulus checks to help people put more money into their savings accounts.
Unfortunately, this trend has reversed in recent months. Money in savings accounts is down not only compared to how much people were saving in his 2020, but also compared to the pre-COVID era. This is very bad news for individuals, families and the economy as a whole.
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Americans don’t have enough savings
The personal savings rate for Americans fell in the third quarter of 2022, according to the St. Louis Federal Reserve Bank. During that time, the personal savings rate for Americans was just 3.3%. This refers to the ratio of savings to personal income after taking taxes and other charges into account.
The 3.3% rate is the lowest personal savings rate since the Great Recession. Down from 3.4% last quarter. Also, his personal savings rate is his eighth lowest since 1947 and has fallen dramatically from both early in the pandemic and before it. In fact, this savings rate is 88% lower than he was in 2020, when Americans were saving more than ever, and 61% below his pre-pandemic savings rate.
Americans are now not only saving less, they are using up their savings. In the second quarter of 2020, he had $629 billion in personal savings across all Americans. That’s just a fraction of her $4.85 trillion that people saved during the second quarter of 2020 when the government was stimulating the economy. But with $1.98 trillion in Q2 2021, he was well below $1.41 trillion in Q2 2019 before the COVID-19 pandemic.
Why is this sad news?
The savings rate most Americans have and the drastic drop in personal savings suggests that people are struggling financially.
This could lead to spending cuts that slow economic growth and push the economy into recession. It can also mean that people who have too little savings do not have the cash they need to cover unexpected expenses and are in debt due to unexpected expenses creeping up on them. As people continue to deplete their savings, it becomes even more likely.
The underlying reason for declining savings also indicates that the current economy is not healthy for consumers. Some are depleting their savings as they spend more to enjoy life post-lockdown, while wages are not keeping up with record-high inflation, forcing them to reduce their account balances to cover essentials. some people
While there is hope that inflation will subside, these low savings rates leave many people without the financial leeway in case an imminent recession hits. If your account balance has dwindled, it may be worth trying to spend less or increase your income (perhaps by taking a temporary side job). You survive the recession.
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