The pandemic has caused many people to rethink savings issues
With falling wages, lost jobs, a down economy, expired government benefits, and a virus that has brought the world to a standstill, there is hope within the country: with the COVID-19 pandemic, Americans have saved more money during this crisis than at any other time.
The savings rate, related to monthly household income, hit a record high of 33.5% in April, before it fell to 19% in June, according to Commerce Department figures. Although the June figure was low, it was still more than double the 7.5% of revenue that was contemplated before the pandemic.
From May to June, many American households added an additional $916 billion to their income above pre-COVID-19 levels, according to the latest data obtained by Moody’s Analytics, a stock expected to exceed $1 trillion when July figures are included.
However, while savings levels in the United States have grown with the pandemic, the vast majority of low-wage workers tend to spend almost all of their paycheck , only contributing less than 5% to savings in the first quarter, according to the same analysis by Moody’s Analytics.
On the other hand, the higher the household income, the more they can contribute. Some have transferred 15% of their salary to savings during the first quarter. This figure is expected to rise amid the pandemic. In addition, if a second economic stimulus check is endorsed, those Americans who have kept their jobs, have an average salary and are below the limits to qualify for this benefit, could have a greater tax on their savings.
But what to spend all these savings on?
“People are saving because they don’t know what the future holds,” Mark Zandi, chief economist at Moody’s, told USA Today. “They are likely concerned about keeping their jobs secure.”
With this, Zandi doesn’t think people are ready to spend their stash of money until they’re more certain the pandemic has wiped out a widely available vaccine, perhaps as early as next year.
Separately, Tom Porcelli, chief economist at RBC Capital Markets, predicts consumer spending could soar to a record 30% annual rate this coming quarter as businesses such as restaurants, department stores and entertainment venues open, after an unprecedented 34.6% drop during the first three months of the year.
To get an idea about the use that is given to the money saved, USA Today presented a case about a citizen of Manhattan Beach, California, who assured that after not going on a trip or spending on meals out or new clothes, it has allowed her to make adjustments to their home with an investment of $4,000 and expect to spend another $30,000 on a bathroom renovation.
That is to say, many of the savings obtained within these months in the midst of the pandemic, would have to be used for their own benefit, either within their real estate or in a way to make them continue to grow in other types of investment even when the economic closure. end and even if you can freely spend your money.