U.S. Savings Rate Hits Record High of 33%: Will This Trend Continue?

Americans haven’t always been the best at saving money. Although that’s been the case for a long time, COVID-19 is changing it. According to the Bureau of Economic Analysis, the U.S. personal savings rate ⁠— the percentage of how much people save from their disposable income ⁠— is at an all-time high of 33% since the bureau started tracking savings in the 1960s. This 33% is up from the 12.7% personal savings rate the bureau reported in March.

Why personal savings is at a record high

Consumer spending is down 13.6%

Although e-commerce is up 25%, as reported by Forbes, consumer spending as a whole is down 13.6%, according to the Bureau of Economic Analysis. The reason for this drop in overall spending? Sheltering in place. Since consumers were confined to the walls of their homes, they weren’t able to dine in restaurants, go shopping or spend money in the ways they normally would. That means this leftover money sat in either their savings or checking account.

Stimulus checks

Remember that roughly $1,200 stimulus check you received a month or so ago? Your savings account may also remember, as 29% of Americans planned to save or invest it, according to a poll by Gallup. This means that savings accounts got an unexpected boost.

Student loan forbearance

As part of the CARES Act, federal student loan payments were stopped from March 13, 2020 through Sept. 30, 2020. Considering the typical amount of student loan debt paid every month is between $200 and $299, individuals with student loan debt could save quite a bit during those 6 months (at least $1,200 based on the typical monthly payment).

Free COVID-19 testing

Depending on where you live, you may have access to free COVID-19 testing, which can not only give you peace of mind, but may also save you some extra cash.

Savings were on the rise before COVID-19 hit

According to the Bureau of Economic Analysis, the personal savings rate has been on the rise since the end of 2019. Add into the stimulus check (assuming you were eligible), decreased spending and continued employment during the pandemic, and it’s easy to understand how someone would be able to boost their savings during the pandemic.

Disability and other government assistance

Depending on the state you live in, there could have been other benefits to compensate you if you were sick or impacted by COVID-19. For example, California allowed workers who were unable to work because they were exposed to or have COVID-19 to file a disability insurance claim. Although assistance like this doesn’t add extra money to your pocket, it can help to make sure you stay afloat for a while. Combined with the other factors on this list, disability and other government assistance could mean that you were able to save more than you were before the pandemic.

Disability and other government assistance

Depending on the state you live in, there could have been other benefits to compensate you if you were sick or impacted by COVID-19. For example, California allowed workers who were unable to work because they were exposed to or have COVID-19 to file a disability insurance claim. Although assistance like this doesn’t add extra money to your pocket, it can help to make sure you stay afloat for a while. Combined with the other factors on this list, disability and other government assistance could mean that you were able to save more than you were before the pandemic.

Will this money-saving trend continue?

It’s not likely. Cities and states across the country are starting to reopen (if they aren’t opened already), which means consumers will likely completely or partially return to their old spending habits. That said, if cities and states opt to close back down because of the rising number of COVID-19 cases, this savings trend could continue — assuming that closures don’t come with more layoffs and that the ongoing government benefits continue through the next round of shelter-in-place.

Is now the right time to start saving?

There really isn’t a bad time to save money. In fact, you should be putting money into your savings account on a regular basis — even if you’re facing hard times. Make sure you keep up with your savings habit — and if you don’t have one, build that habit now! Even if you can only put away $50 or $100 per month, it does add up as time goes on. For example, if you put $100 per month into a savings account, you’ll have $1,200 in your savings at the end of the year. Just remember that after you get back on your feet, you should increase the amount you’re saving to at least 10% of your income.

The aspect of savings that you’ll want to consider in the current economy is where you are putting your money. Interest rates are low right now, which is great news for homebuyers, but not ideal for savers. This means you’ll want to avoid locking your money up into a long-term investment, as it will likely come with a not-so-great rate. Set your money aside in a savings account or consider a short-term CD (12 months or less) instead, and then move it to a longer-term savings option once the economy and rates bounce back.

Not sure how to get started with your savings goals? Our guide to saving money has you covered.

Julie Myhre-Nunes

Personal Finance Editorial Director

Julie Myhre-Nunes has been working in the personal finance space for over 10 years. She discovered her love for everything banking, credit card and loan-related when she was a teller for a major bank during college. Since then, she has moved on to oversee a handful of personal finance websites, including NextAdvisor.com, Interest.com and MillionMileSecrets.com. Julie’s personal finance knowledge has been featured on Fox Business, The Boston Globe and CNBC, while her writing has been published by USA Today, Business Insider, Wired Insights and American City Business Journals, among others. She is an alumna of San Jose State University, and she lives in the San Francisco Bay Area.