For most of the pandemic, the amount of cash in Americans’ bank accounts ebbed and flowed in a pretty predictable pattern.
Each time the government sent out stimulus checks, savings would shoot up. Then, as families spent their aid down, savings would fall.
But in recent months, something different seems to be happening, at least according to the latest study from the JPMorgan Chase Institute tracking checking account cash balances among the bank’s customers. The report reveals three interesting facts: First, Americans still have significantly more cash on hand than they did before the pandemic. Second, instead of declining, balances stayed roughly stable between July and the end of September. And third, both these facts were true for Americans in all four income quartiles.
This is good news that at least suggests the possibility that Americans could end up with permanently higher savings thanks to the government’s COVID relief program. (Oddly, when the New York Times reported on the study Tuesday, it argued that savings were majorly “depleted,” which is only true if you compare them with the period right after the Biden administration sent out stimulus checks.) But why, exactly, do savings seem to have stayed stable?
One factor, which JPMorgan highlights, is almost certainly the monthly child tax credit payments the Biden administration included in the American Rescue Plan, and which the administration is hoping to renew for next year. Even with that extra aid, checking account balances have been very slightly declining for parents. Presumably, families’ cushions would be shrinking faster without the government’s support.
But the child tax credit doesn’t seem like the only factor here. After all, savings among the childless have remained even more stable. So what’s up?
Here’s what I think might be going on. Americans paid off their big expenses or made splurge purchases after the last round of stimulus checks, and were still left with some extra savings above and beyond what they enjoyed before the pandemic. Since then, personal savings rates seem to have returned to their pre-pandemic norm. Between those two factors, it’s possible the country will get a nice, one-time step up in personal savings that gives households across the income distribution a little extra security, assuming households don’t suddenly pick up their rate of spending again.
Of course, this might all be contingent on Democrats renewing those child benefits. It’d be a shame if we gave families extra peace of mind for one year, only to yank it away.