COVID has driven Americans to bank $1.6 TRILLION in savings

[GeorgeJohn]

Although I don't like the idea of storing money in banks, I just think that they could've done a better job like at the least putting it in a index fund or stock market.

From my perspective storing money in the bank is not encouraging from the angle of my understanding, because it doesn't going to yield anything tangible in the bank, so therefore i embrace the ideology of investment of decentralized currency which is Bitcoin and other digital currencies per say, that's is my personal opinion.

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[o_e_l_e_o]

I just think that they could've done a better job like at the least putting it in a index fund or stock market.

Pretty much. Even if you know nothing about the stock market and you don't want to spend time researching, just sticking your money in some global or all world index is far better than leaving it rotting in a bank. Even during the stock market crash at the start of COVID, it only took 6 months to recover to previous levels, and is up another 20% or so since then. Meanwhile the same money in a bank is getting maybe 1% interest while being hit with 5% inflation. You should only be holding in fiat your emergency fund - anything else is a waste.

but the real reason for this current savings debacle is very simple - record low interest rates, quantitative easing, and tons and tons of repos.

All the more reason not to keep money in fiat savings. Pay down your debts, pay into your IRA/match your employer's retirement contributions, buy bitcoin, buy stocks, anything but leaving your money as fiat and getting hammered by inflation.

[Haunebu]

Firstly, Americans != The rest of the world. Secondly, everything is definitely not back to normal. Far from it actually. New deadlier variants of COVID have ensured that in the past couple of years.

More and more better vaccines are being developed to fight all variants of COVID by different companies globally.

However, the silver lining here is that the pandemic is slowly and steadily converting into an endemic which is great news though it will still take a lot more time for everything to go back to normal.

[DrBeer]

Having a financial cushion is a useful and, moreover, necessary thing. In my "theory" - it should be an amount that would allow in any situation, I did not take into account the fantastic and extreme, there the calculation becomes not entirely adequate, the family must live for at least three years. Rent an apartment, buy groceries and essential goods, in a word, keep yourself in acceptable conditions. now part of such a pillow has been converted to cryptocurrency, which somehow symbolizes the support of trends

[davis196]

Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

The people,who are putting money aside "for a rainy day" most likely wouldn't choose a volatile asset like Bitcoin.
I also doubt that they would buy gold,because they need assets,which can offer the best liquidity and lowest risk.Gold has very low risk,but not the best financial liquidity.When you urgently need cash,you'll have to sell your gold as fast as possible.
Keeping cash and having money in the bank are the most obvious choices,when it comes to having the best liquidity and lowest risk.Those people would prefer losing part of their savings due to the inflation,rather than investing in long term financial assets,which can bring decent profit above the inflation rate.
We have to bear in mind that people aren't always rational,when it comes to financial decisions.
 

[dezoel]

I won’t really say that things are back to normal, but things has gotten better than it was during the covid19 time. During the covid19 the price for a lot of things increased and everywhere seems to be quite locked up as sources of income for a lot of people were blocked off due to them losing their jobs. A lot of activities are back to normal and incomes are being generated, so the economy is better now.

As for people choosing to save their money instead of investment, that goes to show that a lot of people hardly knows anything about investment, because they lack the knowledge of investment. This is true, because the average person around you knows nothing about investment, and only does savings. You’d hardly see anyone who is an investor.

[Wayan_Pedjeng]

If people are still keeping their assets in fiat, despite the fact that the federal reserve is printing banknotes like crazy, then they are purely delusional. In my country, the rates for bank deposits have now slipped below the inflation rate. And although stock markets gave good returns for 2021, I don't expect the situation to remain the same for the next few years. One important factor that is keeping retail inflation in check is that crude oil prices are staying below $80 per barrel. If this level is breached, then we'll be in trouble.

[paxmao]

What is worrying is not as much what they actually have in the bank, but rather what they are going to take out of the bank to invest in real state and durable items. It is impossible that this level of irresponsible money printing (it was needed during the first stages of COVID, now is just ridiculous) does not drive a real state bubble a super inflation and a crazy market for the future. This is just not the right way to go.

[fiulpro]

I don't understand how would it work ?
At the end of the day people are saving nothing but fiat and at the same time, the government is lacking the whole system connected with the economy, therefore as long as the money is in the bank they can use it as they please and therefore it's better to hold those savings in other currencies like bitcoins, but then again it's volatile thus scares people Incase something bad happens, I am pretty sure there are many people buying gold as their savings as well, especially in countries like India. But I do think they are doing it the wrong way if they are holding it in banks. Banks don't have economic security right now.

[DrBeer]

If people are still keeping their assets in fiat, despite the fact that the federal reserve is printing banknotes like crazy, then they are purely delusional. In my country, the rates for bank deposits have now slipped below the inflation rate. And although stock markets gave good returns for 2021, I don't expect the situation to remain the same for the next few years. One important factor that is keeping retail inflation in check is that crude oil prices are staying below $80 per barrel. If this level is breached, then we'll be in trouble.

Do you know this word - diversification?
So - a financial pillow is not a bundle of dollars. This is, for example, a "basket consisting" of a bundle of dollars a bundle of euros, several (as you understand not very large) bars of gold / platinum, it can be jewelry (although I don't really like this option), now cryptocurrency has also been added. Although it can be real estate bought in a stable country, the rent of which will give you passive income. In this case, the fall of one as a rule does not lead to the fall of other assets, which means that in total you lose the minimum. Just be smart about building your portfolio.

[jaberwock]

Do you know this word - diversification?
So - a financial pillow is not a bundle of dollars. This is, for example, a "basket consisting" of a bundle of dollars a bundle of euros, several (as you understand not very large) bars of gold / platinum, it can be jewelry (although I don't really like this option), now cryptocurrency has also been added. Although it can be real estate bought in a stable country, the rent of which will give you passive income. In this case, the fall of one as a rule does not lead to the fall of other assets, which means that in total you lose the minimum. Just be smart about building your portfolio.

Diversification is very important, as long as you’re doing right. Sometimes it can be a nightmare, because I have seen people who end up diversifying their assets wrongly and at the end of the day when they check their portfolio they will notice that almost everything, if not all, that they have invested in is on loss. Can be really bad if you don’t know what you’re doing and end up not making the right choice.

But if you do it right, you’re going to be the one who would benefit a lot from it. People who do proper research before selecting assets to diversify with usually make high success rate, like 90%. And the good thing about diversification is that one those coins might have a really huge return on your investment than you expected.

[barbara44]

Most of the people would always go for savings, because that is simply what they know. I don’t think anyone is being taught to start up investing immediately, it’s only few people that  feels the need to invest their money. And in a period like that you would definitely be seeing only few people who would be investing money, and those people are the ones who understand that they are meant to be buying assets when the market is very low.

Others who are just average investors, are going to be afraid to even invest in a moment like that, because they would feel that that’s a wrong time for them to be investing their money in the market, because the market would be dropping and they would feel it’s a loss for them. If you check during that period, the price of so many assets dropped, including Bitcoin and other cryptocurrencies.

[hello_good_sir]

Almost all of the savings will quickly dissipate as spending within the economy in the next year.

I'm honestly not sure what Powell is thinking with QE, it's just not going to work alongside rampant inflation and probably will achieve the opposite effect given that markets generally tank whenever there are rumors that inflation will edge higher in the next quarter.

But this is precisely the reason why we need more than one central party in control of the money supply. $1.6 trillion is no joke and money supply keeps going up. Most of this just ends up in the pockets of the wealthy.

[DrBeer]

Do you know this word - diversification?
So - a financial pillow is not a bundle of dollars. This is, for example, a "basket consisting" of a bundle of dollars a bundle of euros, several (as you understand not very large) bars of gold / platinum, it can be jewelry (although I don't really like this option), now cryptocurrency has also been added. Although it can be real estate bought in a stable country, the rent of which will give you passive income. In this case, the fall of one as a rule does not lead to the fall of other assets, which means that in total you lose the minimum. Just be smart about building your portfolio.

Diversification is very important, as long as you’re doing right. Sometimes it can be a nightmare, because I have seen people who end up diversifying their assets wrongly and at the end of the day when they check their portfolio they will notice that almost everything, if not all, that they have invested in is on loss. Can be really bad if you don’t know what you’re doing and end up not making the right choice.

But if you do it right, you’re going to be the one who would benefit a lot from it. People who do proper research before selecting assets to diversify with usually make high success rate, like 90%. And the good thing about diversification is that one those coins might have a really huge return on your investment than you expected.

I agree that any action with finance/cryptocurrencies should be balanced and thoughtful. As we understand it, this is a market where there are no guarantees, where there is manipulativeness and speculation, where there is the possibility of manual control. Therefore, diversification should also be thought out. Diversification does not mean taking bitcoin, swapping most of it for a bunch of different alternative cryptocurrencies, and waiting for a profit. This means choosing the most promising cryptocurrencies, distributing existing assets into parts, and exchanging them for selected cryptocurrencies. And what is important is to constantly monitor the situation and adjust the portfolio of assets.

[oHnK]

but the real reason for this current savings debacle is very simple - record low interest rates, quantitative easing, and tons and tons of repos.

All the more reason not to keep money in fiat savings. Pay down your debts, pay into your IRA/match your employer's retirement contributions, buy bitcoin, buy stocks, anything but leaving your money as fiat and getting hammered by inflation.

The main impact of this pandemic issue is the inflation. However, the economic conditions due to the pandemic have not completely improved. The difficulty of getting a job with social restrictions imposed and the costs incurred for health are getting bigger, both borne by the state, companies and even individual communities have become issues that support the multiplier effect of the current economic system.

People's psychology to save and save in the form of fiat is an absolute mistake, how can you not? I live in a country with a pretty worrisome economic past, when the economic crisis hit and systemic, the value of fiat became worthless. I myself convinced myself to take out all my fiat savings and convert them into Crypto, Gold, and Property.

Fiat is available only for basic cash flow needs that cannot be replaced. If there are still people in our environment who survive by hoarding fiat money, they need to be educated about the worst impacts.

[laredo7mm]

Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

Most Americans especially old-aged people still trust valuable metals like gold and silver. Around 6% of Americans can use crypto. Though this has been increasing day by day I think many people still fear any new crypto regulation for the American people. It's a hard choice for them to choose between two category assets like one with high-risk high rewards and another with low-risk low rewards. Not every people like to take too much risk as long as they have an alternative to choose.

Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?

The economy has recovered a little bit in 2021 but the high inflation rate, a new variant of COVID-19, and inequality in income threaten to recover emerging economy for many developing countries around the world. New variants of COVID-19 still disrupting the world economy and it indicates that this will damage our economy for the long term. An outbreak of Omicron variants created more financial instability for developing countries and many of those countries still lack any hard policy to control and recover from this pandemic.

[dezoel]

There is nothing wrong with saving 1.6 trillion dollars in the banks, it is just silly to hold it as dollars. First of all, you may think that "how did people manage to save that much if they are poorer this year", well the number is under 5k per person, and we are talking about a lot of rich people saving billions of dollars just themselves hence why the number looks like a bit higher.

This doesn't mean everyone has AT LEAST 5k, it just means the average, so someone with 1 billion dollars in the bank could cover for 200k people all by himself, imagine how many people are out there with 1+ million savings and you will see that there are still millions with absolutely nothing to their name. However no matter where this money came from, you have to realize that we are talking about cash, and that just doesn't make sense, crypto is much better and 1.6 trillion into crypto would be just silly to imagine, like 1+ million per bitcoin levels.

[CaptainCrapper]

The COVID-19 pandemic has driven Americans to hoard $1.6 trillion in 'excess savings' amidst ongoing fears of an economic crisis, despite the fact that experts are warning that the value of these rainy day funds are being slashed by surging inflation rates.

American households would not have put away the huge sum had the COVID-19 crisis not changed the world over the last two years, according to the Federal Reserve Bank of New York.

The funds are far more than the usual three to six months of emergency savings financial advisors typically recommend.

Saving rates have dipped to 2019 levels following four consecutive quarters of record high amounts of savings due to Americans hoarding their savings, money managers, financial advisers and economists say, according to the Wall Street Journal.

But they forsee more cash stockpiling in the immediate future, with the Omicron variant likely to trigger Americans to save yet more of their cash over fears of possible future chaos.  

To make matters worse, annual inflation rates in the United States have steadily increased since January 2021 and through August 2021, starting at just 1.4 percent in January 2021 all the way to 5 percent in August 2021. It has since surged to 6.1 per cent in October, the most recent figure available, and the highest level since 1990.



This chart shows the percentage of disposable income saved by Americans each month - with the rate spiking close to 35 per cent as COVID hit US shores  



The blue line on this chart from the Bureau of Economic Analysis shows the amount of cash Americans saved - in billions of dollars each month, with a COVID spike in 2020. The red line on the right shows the amount economists think Americans would have saved had it not been for the appearance of the virus  

'I have been one of the more optimistic ones, but with this new variant now on the horizon, I think we're in for more of the same of what we've seen over the last six months,' says Wendy Edelberg, director of the Hamilton Project at the Brookings Institution.

In reality, economists say hoarding one's savings can actually hurt a persons' long-term finances if inflation continues to increase, while causing bigger issues for the economy, of which consumer spending accounts for over two-thirds of its gross domestic product, the Wall Street Journal reports.

America's money hoarding began at the start of the coronavirus pandemic, as the government issued three rounds of stimulus checks to qualified individuals.

As the pandemic nears it's second year, and with no end in sign as the specter of the Omicron variant continues to loom large, Americans, many of whom have been largely housebound since the pandemic's onset, have remained thriftier than ever.

The result has been the highest personal savings rate since World War II thanks in part to rising incomes and a healthy labor market, according to the Journal.

'We see a lot of folks sitting on an incredibly high savings amount, and it's really just a fear factor,' says Nina O’Neal, partner and investment adviser with AIM Advisors.

'In 2021, they kind of felt like, "Things were getting better. We're going to get better from the pandemic," and they did, but also, they didn't. It is sort of like the same sideways winding road from last year, and so I think people started to spend a little bit more but they continue to hold that cash.'

However, there has been a slight uptick in spending in recent months as experts say Americans have started to use more credit cards to spend their money on smaller items, with 27 percent of US consumers saying in October they had applied for a credit card over the last 12 months.

And while credit card balances have remained below pre-pandemic levels, the amount increased $17 billion to $800 billion in the third quarter of 2021, with the same sized increase in the second quarter, according to the Federal Reserve Bank of New York.

Americans between the ages of 40 to 49 and 50 to 59 currently make up the lions share of the credit card debt.

And consumer spending on bigger purchases spiked 2.2 percent in October.  

Charlotte Geletka, managing partner and owner at the financial advisory firm Silver Penny Financial Planning, outlined the disadvantages of hoarding savings, as money in the bank only loses value.

Geletka added that on the other hand, cash affords people flexibility and is easier to access in the event of a personal financial crisis.  

Geletka told the Journal that she recommends her clients to split their funds by putting one portion of their savings in the stock market, while keeping the other liquid, as in cash, for easy access should an emergency arise.

Meanwhile, President Joe Biden recently said reversing rampant inflation is a 'top priority' after cost of living increased to 6.2 percent - its highest level in 31 years.

Last month, Biden announced that Jerome Powell will serve a second term as the Federal Reserve Chair.

https://www.dailymail.co.uk/news/article-10269475/COVID-19-turned-Americans-super-savers-hoard-cash-despite-inflation-threatening-value.html

....


We appear to lack complete savings data for 2021. Charts above indicate massive $1.6 trillion in savings for 2020 followed by a dip.

The author of the piece says "everything recovered in 2021" with consumers having no need to emergency binge save anymore.

Wouldn't it be so much better if consumers bought up inflation protected assets, rather than placing their savings in low interest rate accounts for that period. Bitcoin's value grew dramatically in 2021. Could a portion of that growth be attributed to consumers and retail investors placing savings in bitcoin, gold or silver?

Curious to know if anyone feels the economy made a complete recovery in 2021. Are we back to normal?

Oh my god, it a very good informative news so what we can expect is this news market is down for a pandemic bad sistuation. So After recovering market we can get a big something.

[usekevin]

There is nothing wrong with saving 1.6 trillion dollars in the banks, it is just silly to hold it as dollars. First of all, you may think that "how did people manage to save that much if they are poorer this year", well the number is under 5k per person, and we are talking about a lot of rich people saving billions of dollars just themselves hence why the number looks like a bit higher.

This doesn't mean everyone has AT LEAST 5k, it just means the average, so someone with 1 billion dollars in the bank could cover for 200k people all by himself, imagine how many people are out there with 1+ million savings and you will see that there are still millions with absolutely nothing to their name. However no matter where this money came from, you have to realize that we are talking about cash, and that just doesn't make sense, crypto is much better and 1.6 trillion into crypto would be just silly to imagine, like 1+ million per bitcoin levels.

Saving not only depending on the lockdown.It also depend on the people mindset.Only if the people think to save the money.They hold of the money, when they decided to sell at cost. No one can stop them.The people with less money on their hand will surely sell, when they face of medical expenses.The second category people are the rich one, who try to inverse at the dump market. It's to get double of profit from their dollars. Even if they sell at the less price to cash from crypto.