The COVID-19 pandemic has driven Americans to hoard $1.6 trillion in 'excess savings' amidst ongoing fears of an economic crisis, despite the fact that experts are warning that the value of these rainy day funds are being slashed by surging inflation rates.
American households would not have put away the huge sum had the COVID-19 crisis not changed the world over the last two years, according to the Federal Reserve Bank of New York.
The funds are far more than the usual three to six months of emergency savings financial advisors typically recommend.
Saving rates have dipped to 2019 levels following four consecutive quarters of record high amounts of savings due to Americans hoarding their savings, money managers, financial advisers and economists say, according to the Wall Street Journal.
But they forsee more cash stockpiling in the immediate future, with the Omicron variant likely to trigger Americans to save yet more of their cash over fears of possible future chaos.
To make matters worse, annual inflation rates in the United States have steadily increased since January 2021 and through August 2021, starting at just 1.4 percent in January 2021 all the way to 5 percent in August 2021. It has since surged to 6.1 per cent in October, the most recent figure available, and the highest level since 1990.
This chart shows the percentage of disposable income saved by Americans each month - with the rate spiking close to 35 per cent as COVID hit US shores
The blue line on this chart from the Bureau of Economic Analysis shows the amount of cash Americans saved - in billions of dollars each month, with a COVID spike in 2020. The red line on the right shows the amount economists think Americans would have saved had it not been for the appearance of the virus
Pictured: changes in inflation between October 2020 and October 2021, showing the cahnges in various regions of the US
'I have been one of the more optimistic ones, but with this new variant now on the horizon, I think we're in for more of the same of what we've seen over the last six months,' says Wendy Edelberg, director of the Hamilton Project at the Brookings Institution.
In reality, economists say hoarding one's savings can actually hurt a persons' long-term finances if inflation continues to increase, while causing bigger issues for the economy, of which consumer
