During the pandemic, jobs have disappeared, and businesses have shut down. Nevertheless, the paradox is that American households have, on average, been saving more money than they usually do. ‘Personal saving rate’ of the country has rarely exceeded ten percent in the past twenty years. ‘personal saving rate’ is the share of disposable income of people that get invested or saved. Nevertheless, it shot up to more than three times that in April. Thanks to government aid, the checking-account balances of Americans up and down the income scale rose in the first few months of the coronavirus pandemic.
Many people’s balances are likely falling now that aid has been discontinued. Thus, they make their daily life even more precarious. Nevertheless, one segment of the country will keep on saving. Therefore, they live in an economy all their own. While their spending has decreased dramatically, their incomes have remained steady.
Spending declined steeply for high earners and low earners alike when lockdowns started in March. Peter Ganong is an economist at the University of Chicago. He co-authored a paper analyzing household finances in March, April, and May. He said that the people who had the least jobs loss are precisely the people who have the most significant cut in spending.
There are people whose monthly expenses have fallen by hundreds and, in some cases, thousands of dollars amid the pandemic. They are spending less on daily comforts that are now unnecessary or dangerous, including extracurriculars for their kids, new clothes, entertainment, and eating out.
Pandemic and Super-Savers
Travel cutbacks keep large amounts of cash in accounts of people. Lyn Alden is a 33-year-old investment researcher in New Jersey. She said that by skipping one short trip to New York City and two longer one to visit relatives in Egypt and Florida, her family reduced their travel spending by approximately $15,000 this year.
Other spending cuts are more minor. Nevertheless, they still add up. Jeremiah Stanley is a 40-year-old engineer at a tech company in North Carolina. He said that one of the highest costs before the pandemic was his ‘bad’ habit of eating out nearly every day at work. Moreover, Stanley added that the office culture is to have (lunch) meetings off-campus and this (costs) about $23 daily.
Nevertheless, lately, he has been working from home and making sandwiches of ham instead. Thus, it left him an extra $400 a month to save or spend. All in all, he is estimating that he and his girlfriend have together been spending around $750 less on food each month.
Taryn is another remote worker. She is in her late 20s and works in the Chicago area at an accounting firm. She estimated that she spends $400 less monthly during the pandemic.
Earlier this year, she and her husband qualified for $2,400 in stimulus payments. Moreover, she added that they did not need the money, and she currently makes $87,000 a year.
Taryn said that it feels good. Nevertheless, it is also a bit strange. It’s a weird feeling when you have extra money, said Taryn, when there is nor reason to buy things.