Americans' savings dry up as amount families have in reserve hit pre-pandemic levels for the first time
- Roughly 80 percent of Americans have less extra cash in reserve than before the pandemic, according to a new Federal Reserve study of household finances
- Bank deposits and liquid assets have dipped below their levels in March 2020, after adjusting for inflation
- READ MORE: JPMorgan boss warns 7% interest rates would cripple the global economy
The pandemic has taken a toll on American finances, with a recent study revealing that a staggering 80 percent of Americans now find themselves with less extra cash in reserve than they did before the pandemic hit.
Bank deposits and liquid assets have dipped below their March 2020 levels - after adjusting for inflation - according to Bloomberg and a San Francisco Federal Reserve study of household finances.
Additionally, there is a stark disparity between economic classes.
The poorest two-fifths of Americans saw an eight percent decrease in cash savings. In contrast, the richest people in the country have experienced an 8 percent increase in cash savings compared to pre-COVID.
The middle class also witnessed their cash savings drop below pre-pandemic levels in the last quarter.
![Bank deposits and liquid assets have dipped below their March 2020 levels - after adjusting for inflation](https://i.dailymail.co.uk/1s/2023/09/26/15/75852293-12562113-image-a-1_1695739498211.jpg)
Bank deposits and liquid assets have dipped below their March 2020 levels - after adjusting for inflation
![The pandemic has taken a toll on American finances, with a recent study revealing that a staggering 80 percent of Americans now find themselves with less cash in reserve than they did before the pandemic hit](https://i.dailymail.co.uk/1s/2023/09/26/16/75852387-12562113-The_pandemic_has_taken_a_toll_on_American_finances_with_a_recent-a-2_1695742740393.jpg)
The pandemic has taken a toll on American finances, with a recent study revealing that a staggering 80 percent of Americans now find themselves with less cash in reserve than they did before the pandemic hit
![The poorest two-fifths of Americans saw an eight percent decrease in cash savings. In contrast, the richest people in the country have experienced an 8 percent increase compared to pre-COVID](https://i.dailymail.co.uk/1s/2023/09/26/16/75852385-12562113-The_poorest_two_fifths_of_Americans_saw_an_eight_percent_decreas-a-1_1695742740392.jpg)
The poorest two-fifths of Americans saw an eight percent decrease in cash savings. In contrast, the richest people in the country have experienced an 8 percent increase compared to pre-COVID
To calculate the amount of excess savings, officials used a baseline of what savings would have been if pre-pandemic trends continued. Then, many Americans saved more money during the pandemic because social distancing limited activities.
So in January 2022, the bottom 40 percent of American household incomes saw 103.3 percent in savings - or 3.3 percent in excess of expected because of the pandemic.
The drop raises concerns about the diminishing financial resilience of US consumers, who have played a pivotal role in keeping the economy afloat.
Some analysts warn that for some households, this loss of savings could continue.
The Federal Reserve Bank of San Francisco is sounding the alarm, suggesting that the excess savings will likely be spent in the current quarter as Americans continue to deal with inflation's impacts and everyday goods costing more money.
While household net worth has reached a record high during the period between April and June, this was driven by less cash and instead forms of wealth such as housing and stock gains, according to government data reported by Bloomberg.
The trajectory of household finances post-COVID has also been unique due to significant government support and enforced savings during lockdowns.
This comes as the country faces the resumption of student loan payment after a three-year hiatus.
That will force more American families to pay out more money than they had in the last three years to cover their student loan repayments - which is often hundreds of dollars a month.
In October, roughly 27 million borrowers are due to repay their federal student loans after the three year pause.
![Some 56 percent of 526 respondents to a recent Bloomberg survey said consumption would most likely drop in the first quarter of 2024](https://i.dailymail.co.uk/1s/2023/09/26/15/75340757-12562113-Some_56_percent_of_526_respondents_to_a_recent_Bloomberg_survey_-a-4_1695739674601.jpg)
Some 56 percent of 526 respondents to a recent Bloomberg survey said consumption would most likely drop in the first quarter of 2024
Last year, President Joe Biden tried forgive nearly $400 billion in student debt using his executive powers, but the Supreme Court overruled that decision in June.
Although American consumers have kept up with inflation and remained resilient amid increasing interest rates during and post-pandemic, some worry that student loans may be the breaking point.
Earlier this month, a survey revealed that US consumers were set to cut their spending in early 2024 for the first time since the pandemic as they battle looming financial pressures.
Americans have thus far defied analysts' expectations of a recession by maintaining strong spending to bolster the economy. Consumers splurged this summer on record-breaking blockbuster movies and concert tours, including Taylor Swift's Eras Tour and Margot Robbie's Barbie.
But experts predicted that may be coming to an end.
Some 56 percent of 526 investors surveyed by Bloomberg said consumption would most likely drop in the first quarter of 2024.
Meanwhile, 21 percent said the tipping point could arrive sooner, in the fourth quarter of 2023. The remaining 23 percent thought spending would 'remain positive for the foreseeable future'.