It’s no mystery as to why more than one-quarter of Americans consistently reported they were financially better off over the course of 2021. Stimulus money, postponed student loan repayments, decreased discretionary spending in 2020, and shifts in the labor market led many to see their savings and investments grow over the past couple of years.
Similarly, recent CivicScience survey results find that 37% of U.S. adults report they were able to grow their savings from 2020 to 2021 (n=2,669).
Naturally, the more you make, the more likely you are to have been able to save. Around half of households earning $100K or above per year grew their savings over the course of the pandemic, compared to 38% of $50-100K earners and just 29% of those earning $50K or less.
Extra savings helped to rekindle demand as the economy reopened, which was still being felt into April of 2022. Recent data indicate that savings are still up from pre-pandemic levels – the percentage of U.S. adults putting a portion of their monthly income into savings (including retirement investments) is higher now than it was in all of 2019, 2020, and the first half of 2021, as the data below show.
However, it’s clear that the savings boom peaked in Q2 of 2021 when nearly one-third of respondents were setting aside more than 10% of their monthly earnings (including retirement savings). Since then, a growing number of people are saving from 1% to 10% monthly, while a declining percentage (27%) are saving more than that (quarter to date).
How long before those extra pandemic-era savings run dry? Some speculate an estimated $2.3 trillion in excess savings buys plenty of time. However, this falls short of painting the full picture of challenges being posed to businesses and consumers. Demand is already softening in many areas, as consumers rein in spending on retail especially, leaving retailers to contend with surplus supply.
CivicScience survey results find that the percentage of people who are now tapping into their savings for payments and purchases already exceeds the percentage of those who say they were able to grow their savings over the pandemic.
Nearly 40% of all adults (or 44% of Americans with savings) said they have unexpectedly dipped into their savings this year (n=2,632).
Those turning to savings now are significantly less likely to have acquired extra savings over the pandemic. More than half of adults who did not grow their savings from 2020 to 2021 are making unexpected withdrawals from the savings they have maintained. Even so, 30% of adults who did grow their savings have used them unexpectedly this year.
In total, 64% of Americans with savings say they have used their savings to finance purchases this year. While putting savings toward big purchases such as a home or a vacation is to be expected, a greater number of people have used their savings for basic necessities, utilities, and medical bills more than any other categories included in the survey. More than one-quarter used savings to pay for essentials like groceries and gas; one-quarter used savings to pay for utilities; and over 20% used savings to pay for medical bills this year (n=2,313).
That corresponds with recent data that show a growing number of households are making tough choices when it comes to affording basic necessities and healthcare.
Expectations regarding savings are rapidly shifting as well. The percentage of people who expect to have less money saved six months from now shot up from 25% in April to 33% for the month of June, eclipsing those who expect to have “the same amount in savings as today” for the first time since March of 2020 (the start of the pandemic). Those who expect to have “more” in savings in six-months time fell steeply from 45% in April to 40% in June.
Looking ahead, the majority of survey respondents (55%) say they may need to use their savings to make payments and purchases in the next six months. Close to a quarter say they are “very likely” to do so (n=2,335).
Savings and consumer expectations play a key role in the delicate balance between demand, inflation, and the Fed’s interest rate hikes, all of which are amplified in the recent downturn to a bear market. CivicScience will continue to track these numbers and further investigate the interplay between saving and spending among Americans.