Americans have been cash-poor for decades leading into the pandemic last year. It seems that using credit – mortgages, student loans, car loans, and consumer credit – have just become an unfortunate part of American life.
Related: Debt Has Spread Like Virus
With the pandemic, people are spending less on discretionary things like travel and eating out and the government has sent out several rounds of stimulus checks to most households (with another likely on the way). As a result, across the country, Americans are sitting on an amazing pile of cash. This JP Morgan chart shows just how much:
Despite this seemingly good news, I’m a pessimist when it comes to predicting most people’s future financial habits, so I’ll guess that this is a temporary blip and that the cash will go somewhere in 2021. Either it will be spent, invested, of used to pay bills.
I’m hoping that it goes toward paying down debt – but that’s unlikely. Even as cash savings have risen, household debt has continued to go up at a pretty steady rate according to this NY Federal Reserve chart:
The debt trend is unfortunate given that the #1 pillar of financial independence is spending less than you make. It seems that households – like government & corporations – continue to live for today, without serious worry for the potential impacts on tomorrow.
Do you foresee anything that will reverse this trend?
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