Infusions of government cash that warded off an economic calamity have left millions of households with bigger bank balances than before the pandemic — savings that have driven a torrent of consumer spending, helped pay off debts and, at times, reduced the urgency of job hunts.

But many low-income Americans find their savings dwindling or even depleted. And for them, the economic recovery is looking less buoyant.

Over the past 18 months or so, experts have been closely tracking the multitrillion-dollar increase in what economists call “excess savings,” generally defined as the amount by which people’s cash reserves during the COVID-19 crisis exceeded what they would have normally saved.

According to Moody’s Analytics, an economic research firm, these excess savings among many working- and middle-class households could be exhausted as soon as early next year — not only reducing their financial cushions but also potentially affecting the economy, since consumer spending is such a large share of activity. Additionally, many pandemic-era federal programs expired in September, including the federal supplement to unemployment benefits.

In April 2020, after the pandemic’s outset, the nation’s personal saving rate — the percentage of overall disposable income that goes into savings each month — jumped fourfold from its February 2020 level to 34%. Some of that spike in savings resulted from government checks of up to $1,200 sent to most Americans; some simply stemmed from reduced spending by firmly middle-class or affluent households during lockdowns.

The rate peaked again at 26% in the spring after another round of direct federal payments.


But the personal saving rate does not account for how those savings are distributed. Wealthy households, for instance, have saved the most.

“We do tend to see these broad-brushstroke economic figures and assume that they apply to the broadest part of the populace,” said Mark Hamrick, senior economic analyst at Bankrate, a personal finance company. “There’s a significant cross-section of the American public which is financially fragile.”

New research by the JPMorgan Chase Institute, which assesses the bank accounts of 1.6 million families, found that low-income families experienced the “greatest percent gains” during each round of stimulus, yet also exhausted their balances faster. That is in part because those households went into the crisis with the thinnest financial buffers.

The median balance among higher-income families — those earning more than $68,896 a year — was roughly 40% higher in September than two years earlier. The typical low-income family, those earning less than $30,296, experienced a much larger increase in relative terms — 70% — but that represented a total cash balance of only about $1,000.

And households making $30,296 to $44,955 also made significant gains compared with 2019, yet typically had less than about $1,300 in cash on hand. In a silver lining, the report found that the cash balances of families with children appear to have been helped by the three rounds of monthly child tax credit payments that began in July, which provided up to $300 per child younger than 6 and up to $250 per child 6-17.

“I’ve been trying to ask myself this question: Is this a lot or is this a little?” said Fiona Greig, a co-president of the JPMorgan Chase Institute. Greig said that when reviewing the data, she was torn between hope — when seeing that “families had a doubling of balances in some cases when they received their stimulus checks” — and disappointment knowing “there are some families for whom this is really all they have.”


By October, the U.S. personal saving rate, which had peaked above 30%, had reverted to its December 2019 level of 7.3%.

Technically, most households are financially better off now than before the crisis by several measures, an anomaly after a recession. Still, the fading impact of pandemic aid is quickly being felt. In July, 1 in 3 Americans reported having less money to fall back on in an emergency than before the pandemic, according to a Bankrate survey. Only 1 in 6 reported having more.

In a commentary published on a Federal Reserve Bank of New York blog in April, four economists argued that “although large by historical standards, the savings accumulated by U.S. households during the pandemic do not appear to be ‘excessive’ when set against the extraordinary need of many American families.”

Millions of Americans could be buffeted by financial volatility again with little safeguard as new variants of the virus emerge. For some, that reality has already begun.

“It was hard even before the pandemic hit,” said Maria Patton, 57, a former real estate agent whose finances were ruined by a recent divorce. “And when the pandemic hit, it became impossible, almost.”

Patton, who has a teenage son, had just been hired at Nordstrom in Los Angeles when the virus surged and she was laid off. Despite immediately applying for unemployment insurance in March 2020, she went more than two months without receiving benefits. She tried to find work as a nanny — which had been her most recent employment — but wound up moving home to Tennessee, where she figured the cost of living was more affordable.


As she was moving in the middle of last year, she received back payments for all the weeks she was eligible for Pandemic Unemployment Assistance — an emergency federal program to help freelancers and others who do not ordinarily qualify for state benefits — which amounted to a lump sum of $15,000. Much of that cash, Patton said, went to paying down debt, as well as “paying for medical insurance out of my pocket” because she cannot afford health care coverage, and living in a hotel because landlords in Nashville did not like her credit situation.

Patton used more of her savings in January to move the two of them to Denver for a $25-an-hour nanny job she found online, which went well until she got COVID-19 and had to quit. Now she and her son work for Amazon Fresh, the grocery delivery service, making $15 an hour. Her savings dried up in September.

“Now, I’m right back where I was,” she said. “I feel like a loser. I feel like a failure.” Making too much to qualify for assistance but too little to afford stable housing, she fears she and her son will be living out of her car soon after the holidays.

There has been wide agreement among business leaders and economists that after decades of wage and income stagnation, the burst in savings has eased poverty while giving employees and job seekers more leverage. But there is less agreement about whether this development has had unintended, negative consequences.

The cash buffer “gives people some discretion over whether they take the first job that’s available or if they want to leave the workforce altogether for a time,” said James K. Galbraith, a progressive economist at the University of Texas at Austin.

Wages were up 4.8% overall in November from a year earlier and were much higher in sectors like leisure and hospitality.


Many investors and business owners are wary of these wage gains continuing, contending that companies may pass more of their labor costs on to customers and that they may threaten companies’ profitability, or even their viability.

A Bank of America report in November noted that price increases for some goods, especially in food and energy categories, were “cutting the spending power of less-educated households by 4.6% on an annualized basis, compared to 3% for more-educated households.”

Still, a report from JPMorgan points out that consumers are likely to “eat into their accumulated excess savings to offset rising prices,” suggesting that vulnerable households could potentially face an even greater inflation challenge if those savings were absent.

Moody’s Analytics estimated that there was still $2.5 trillion left in overall excess savings as of October and that the total would decrease by $50 billion a month on average through the end of next year — with the fastest declines among those with the lowest incomes.

That mathematical modeling, by its nature, renders in statistics what many are feeling in more palpable ways.

“The people looking at the data aren’t the people trying to put food on the table,” Patton said. “The people that are writing this and thinking this have never struggled right now.”