Sudden Savings Surprise

Anyone that has tried to make a major purchase recently – a home, remodel, new vehicle, or electronic purchase – knows how tight supply is for everything after the pandemic. At the same time, investors are wringing their hands over rising inflation.

With that in mind, I was surprised to see this JP Morgan chart on the US personal savings rate. People are doing a lot more saving than spending right now …!

The chart goes back more than 50 years and we’ve never seen anything like this. I know the government has been sending out stimulus checks to folks whether they needed them or not, but I’m still surprised those $$$ ended up in savings.

Related: Our National Savings Dilemma

At the same time, spending (personal consumption) has bounced back nicely to it’s pretty-pandemic trend. It dropped off last year for sure, but is now back to where you would have thought it would be had there not been a pandemic …

It’s felt a lot like people are sitting home and spending MORE than ever before, but I guess that’s not the case. I would guess that if you looked by industry you would still see some wide variation. I’m thinking commercial real estate and the travel industry are still hurting a lot, while other categories are way up.

Still, the strong savings rate is a good sign that people haven’t just ‘blown’ their stimulus checks on short-term desires and maybe will use it for more productive long-term purchases, such is driving the housing market.

Have you productively redeployed your pandemic savings, or have you just banked it? We shifted our travel budget to our eye surgery and couldn’t be happier with the outcome.

Image Credit: Pixabay

6 thoughts on “Sudden Savings Surprise

  1. Given our four-plus years of early retirement spending history, and the incredible market returns during the past ten-plus years, we had already built some larger safety nets of money should the market tank significantly. We also redeployed (rebalanced – bonds to equity) some funds at the low point of the market last year and made a small fortune from that simple rebalancing move. So we were (fortunately) already in great shape as stimulus checks started to arrive. Those stimulus checks were simply deposited into our CAPEX account to further enhance our cushion in this area. We will likely end up utilizing them for a home improvement change at some point, as we were already sufficiently cushioned in this area.

    It’s good to see many folks have increased their savings levels (most likely related to their stimulus checks). Unfortunately, it shows how ridiculous this wide-spread move ultimately was by our government. Sending someone in our situation stimulus funds was a complete waste. I get the panic and haste to make things better for those truly in need, but there should’ve been better guard rails on the government spending frenzy. Hopefully the average person benefited and it made life easier for many during a difficult time, so I kind of get it. But I worry what the ultimate cost will be to our kids and grandkids in terms of government debt. We shall see…inflation is a the ultimate back door form of taxation.

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    1. I agree that the savings surge shows that government $$$ were wastefully spent. We didn’t get the stimulus checks, because I was selling stock options, but I did get forgivable PPP money for my small but profitable board/consulting work. What I received was a small fraction of what I actually paid in taxes, so I didn’t feel bad about it. I think we’ll know by the end of the year if the inflation we’ve seen will back off or if it completely ‘sticks’.

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  2. Chief, I was talking with my 11-year-old granddaughter about the importance of goals and savings yesterday. She is by nature observant, processes various inputs, and reacts accordingly. By urging her to think ahead about goals, she can apply her savings to reach those goals over a specified period of time. She understood it’s a bit like a game in which you get to set your own rules and reap your own rewards. A good start on life!

    Liked by 1 person

    1. Great advice from a very successful Grandparent! It just shows the game is so simple even an 11 year old can figure it out. Unfortunately, too many fall victim to the indulgences of debt and ‘affluenza’ along the way.

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  3. I, too, suspect that this is largely a stimulus-fueled blip, but it will be interesting to see how the pandemic affects savings over the next few years. Did the financial uncertainty that many experienced result in any long-term shifts in spending patterns, or will it be back to spending-as-usual (as your second chart suggests)?

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    1. I’m guessing that spending will return as everything reopens. Still, it’s good to see that even though the government were handing out money, people were responsible enough to hold onto it – even for the short-term. I wouldn’t have necessarily expected that!

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