How Has the Pandemic Impacted U.S. Savings Rates?

An image showing the value of saving versus spending Getty Images
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

As local economies shut down and the service industry flounders, Americans are saving a greater percentage of their money than ever before, according to new data. 

But the high overall U.S. saving rate is hiding a deep inequality. 

While many are cutting back on their spending and hoarding cash like never before, poorer Americans are still spending nearly as much of their money as before the pandemic.

“The problem in America, in particular, is that there’s a very large portion of the population that was living paycheck to paycheck. They couldn’t save enough to miss one payment or put $400 aside for an emergency,” says Sarah Nadav, a behavioral economist in the World Economic Forum’s expert network. “So, if they were barely able to pay their bills before then they don’t have very much room to cut down and save now.”

The U.S. personal saving rate —  the percentage of people’s income remaining each month after taxes and spending — skyrocketed to a record 32.2% in April, up from 12.7% in March, according to the U.S. Bureau of Economic Analysis. At the same time, consumer spending fell 12.6% as the economy slowed down and unemployment rose. 

Data from the Federal Reserve Bank of St. Louis shows the previous record American saving rate was 17.3% in May 1975, at the tail end of a recession spurred by rocketing gas prices, government spending on the Vietnam War, and a Wall Street stock crash. Over the last 10 years, it has hovered in the 6-8% range. 

The saving rate usually goes up when there’s a decline in general economic activity, but it can quickly fall back down when there are positive signs of growth, according to a 2018 Congressional Research Service report.

In June, the saving rate fell 4.2 percentage points from May to 19%, the Bureau of Economic Analysis said Friday. That’s a sign people started spending more when businesses partially reopened, though the rate could be affected in July by the increase in COVID-19 cases and the end to the extra $600 in federal unemployment benefits.

U.S. Personal Saving Rates in 2020

Note: Saving rates based on Federal Reserve data from 2020.

Who’s Saving During The Pandemic?

Americans have historically struggled to save money, for a number of reasons. According to a 2019 report by the Federal Reserve, four out of 10 Americans would be unable to pay an unexpected $400 bill out of their savings.      

A typical middle-class lifestyle in the U.S. is 30% more expensive than it was 20 years ago, according to Alissa Quart, executive director of the Economic Hardship Reporting Project and author of “Squeezed: Why Our Families Can’t Afford America.” 

And while the pandemic has presented Americans of all income levels with financial challenges, these hardships have been exacerbated for people who have lower incomes. 

According to a recent study from a Harvard-based research group, coronavirus is disproportionately harming lower-income Americans. This group is still spending nearly as much as it did pre-pandemic, despite the personal saving rate hitting a record high in April. 

The findings reveal that high-income Americans are responsible for most of the reduction in consumer spending, particularly in areas with high rates of COVID-19 infection and in sectors that require physical interaction. 

Pro Tip

Do some math; take a look at what you owe and what you can do to bring in cash now. Create an emergency version of your budget and stick closely to it to save up what you can during these uncertain times.

High-income households reduced their spending by 17%, whereas low-income households reduced their spending by only 4% as of June 10, according to the study. Almost 70% of low-wage earners working in the highest-rent ZIP codes lost their jobs during the initial shutdown.

Where people have cut their spending during the recession caused by the coronavirus is very different from prior recessions. In previous downturns, people stopped spending on costly items like cars and homes, while still spending on common services. It’s the opposite this time around; spending fell most on services that require in-person interaction, such as restaurants and hair salons.

Yelena Maleyev, an associate economist at accounting and advisory firm Grant Thornton, says it’s important to note the correlation between wealthier households and older ones. Baby boomers have the most wealth compared to the other generations.

“The wealthier households were already spending more on services than goods. Fast forward to the pandemic, they’re not going to go out to any of these places because they’re closed. Furthermore, they’re more likely to be older, so they’re also more vulnerable to the virus,” Maleyev says.

So, while the personal saving rate has risen over the last few months, research and data show that not all Americans are saving more during the pandemic. 

U.S. Personal Saving Rates in Historical Perspective (2000-2020)

Note: Saving rates based on Federal Reserve data from 2000-2020. NextAdvisor calculated the cumulative average saving rate for every year over the last 20 years. The cumulative average may vary more and percentages may not total 100 due to rounding.

How Long Can It Last?

Many experts expect that urge to save to stick around for the long haul, while others say it’s a temporary trend driven by uncertainty. 

“Pre-pandemic, we were starting to see the rate slowly inch up from the historic lows in the early 2000s, which kind of coincided with the housing boom,” Maleyev says. “So we already saw this trend; it just got exacerbated by this pandemic and the fact that the recession is a service-driven recession. It’s very unique. We’ve never seen this before.” 

Consumer spending accounts for almost 70% of the U.S. economy, so saving at the individual level instead of spending—while incredibly beneficial—could also pose a risk to the economy’s recovery in the long run, experts say. 

“America, in general, is a consumer-based economy, and that’s not really going away without some serious long-term changes. Those are bigger questions that will in turn contribute to some changes in how we spend vs. save,” Maleyev says.

How To Grow Savings During The Pandemic

With a high percentage of Americans out of work and a tanking economy, you may be wondering how you can even think about saving money during a global health crisis. 

“In the big picture, people are really afraid. They probably weren’t saving as much as they could’ve or should’ve,” Nadav says. “When people are afraid, they do start saving money and putting it aside, assuming correctly that they’ll need it.”

A lot of traditional financial advice doesn’t apply in these unprecedented times, but there are ways you can conserve the money that you do have—starting now—regardless of how much it is.

It may be challenging to save right now but it’s not impossible, and this could be the wake-up call you need to form saving habits that will last beyond the current crisis.

Save Over Paying Down Debt

Trying to pay off debt and build your savings at the same time can be frustrating. Pam Capalad, a certified financial planner and founder of Budget and Brunch, recommends prioritizing savings over paying down debt right now.

“It’s unconventional advice, but it’s the advice I give to clients regardless. Prioritizing savings over debt means you end up having savings and paying down your debt anyway,” Capalad says.

Without some money saved up during these uncertain times, you could simply wind up borrowing and adding more debt to your plate in order to pay your essential bills or any unexpected costs, she says.

“Especially now when it comes to prioritizing food, shelter, and sanity, if you have debt that you’ve been trying to pay down, don’t worry about it right now. Whether it’s student loan debt or credit card debt, the priority right now is putting money in the bank,” Capalad says.

You should be making minimum payments on your high-interest debt if you can, but there are numerous types of debt that Capalad says can likely be put off for now, or at least negotiated. That would include credit-card debt, back taxes, and even federal student loans, which are on pause until October 1.

Calculate Your Saving Rate

A saving rate can be calculated for an economy as a whole or at the personal level. Knowing how much you bring home relative to what you spend can give you a clearer idea of your financial situation and help you start saving. Here’s how you can calculate your own saving rate in five easy steps:

1. Calculate your income for a specific period of time (i.e. one month)

2. Calculate your spending for the same period

3. Subtract your spending from your income

4. Divide the number calculated in step three by your income

5. Multiply by 100.

Keep in mind that your income should be after taxes, or you risk over-estimating your savings.

Prioritize Your Essential Expenses

Now is the time to budget, especially if you’re worried about losing your job. You’ll need to figure out where you can completely cut out costs or reduce spending if money gets tight, and start tracking all your expenses—that means every coffee, household item, and take-out meal.

In your “essentials-only” budget, prioritize your important expenses (food, housing, etc.) and look at your discretionary expenses to see where you can cut back. Your lifestyle and discretionary categories will likely offer the most potential relief, but you should also take a hard look at your fixed expenses, including your rent or mortgage. 

If you can terminate your rental agreement, you could consider moving back home if you’re feeling too much financial pressure. In fact, millions of Americans have moved back in with their parents to save money during the pandemic, a recent Zillow report found. Additionally, make note of any subscription or annual fees you could pause or cut out. 

Negotiate Your Bills

If you’re financially struggling, any bill is negotiable. Many credit-card companies, utility providers, and cell phone providers are offering assistance during the pandemic, so call them as soon as possible to see what your options are. Keep in mind most companies are not offering complete forgiveness — you will eventually have to pay any bills you skip.

Figure out which calls you need to make and roughly what kind of assistance you’d be looking for in dollar amounts. Try to focus on paying your essential expenses like your rent or mortgage if you can. 

Seek Government Relief

If you haven’t already, take advantage of government relief. The extra $600 weekly jobless benefit is about to end, but you can still apply for unemployment insurance through your state’s individual system. Every state has different requirements and benefits, so use this resource to learn more about your state’s program. Even if you’re just getting the bare minimum of unemployment insurance, anything is better than nothing. 

Congress is currently negotiating another aid package that could extend the extra unemployment support, though likely at less than $600. There also may be another coronavirus stimulus check on the way.

You could also work with a credit counselor who can advise you on your money and debts. Many non-profit credit counselors often offer initial budgeting sessions at no cost. To find a credit counselor, you can try the Financial Counseling Association of America or the National Foundation for Credit Counseling.

If you think you might fall behind on your mortgage payments because of coronavirus, forbearance under the CARES Act may be an option to consider. The U.S. Department of Housing and Urban Development also funds housing counseling agencies throughout the country that provide free advice on renting, defaults, foreclosures, and credit issues. If you’re not sure where to start or want to learn more about your options, take a look at this comprehensive list of financial resources