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The richest 20% of America are the real pandemic supersavers

During the worst year for economic recovery since 1946, Americans socked away money at a historically high pace.

But those savings largely stayed in the pockets of higher earners, while everyone else held close to nothing by the end of 2020.

U.S. households accumulated around $1.6 trillion in excess savings over the last 10 months, according to an analysis by Oxford Economics. But the top 20% of earners — and to a lesser extent the second 20% —account for all the current accumulated cash. Meanwhile, the bottom 60% have spent most of the savings they accumulated in the pandemic from direct payments and unemployment benefits.

“All of the savings buffer is essentially now in the hands of the top 40%,” Gregory Daco, Oxford Economics’ chief U.S. economist, told Yahoo Money. “Whereas the bottom 60% have essentially spent most of their fiscal transfers.”

The top quintile of households has saved an average of $50,000 since the pandemic started, while for the second quintile averaged $9,000, the analysis found. For the rest of the population, their savings are currently at their pre-pandemic levels or, in some cases, lower.

The personal savings rate reached a historic high of 33% in April and remains elevated at 13.4% in the fourth quarter of 2020, which would be the highest quarterly rate since 1975 if second and third quarters of 2020 are excluded.

The savings rate for the bottom 60% of earners, though, is now at its pre-pandemic levels or lower, while it remains higher for high-income earners, according to Daco.

And while lower-income households held a larger share of the savings in the spring months when the bulk of the $1,200 stimulus checks were disbursed and the extra $600 in weekly unemployment benefits under the CARES Act was available, that money quickly disappeared.

“Even though the fiscal transfers did lift the savings rate to 33% back in April, a lot of that was was fairly rapidly spent,” Daco said.

NEW YORK, NEW YORK - SEPTEMBER 21: People walk along Wall Street in lower Manhattan on September 21, 2020 in New York City. As parts of Europe prepare for another lockdown due to a resurgence in COVID-19 cases, markets across the globe fell due to the economic uncertainty. The Dow Jones Industrial Average fell over 900 points in morning trading.  (Photo by Spencer Platt/Getty Images)
People walk along Wall Street in lower Manhattan on September 21, 2020 in New York City. (Photo by Spencer Platt/Getty Images)

‘You need to bridge that gap and you need to do it quite urgently’

During the pandemic, the savings rate for the bottom 40% has largely unchanged, while it has significantly increased for the top 40%, according to Daco.

Lower-income earners have taken in less income than their expenses during the winter months versus March, while earners in the top quintiles increased their share of the cumulative savings.

Jobless workers more than doubled their liquid savings between March and July, another study by the JPMorgan Chase Institute found, but they spent two-thirds of those accumulated savings in August alone.

While the government passed a $900 billion stimulus package in December, the extra unemployment benefits along with key unemployment programs will expire in March. The $600 stimulus checks also have been mostly distributed — meaning any boost in savings for lower earners would be temporary.

Such policies have supported the savings of the bottom 20% early in the pandemic and more stimulus would help the lowest earners financially through the rest of the pandemic, according to Daco.

“The bottom-income quintile is generally dissaving, they have a savings rate at any given point in time that is close to zero or slightly negative,” he said. “That's where the urgency of fiscal stimulus is so important, in that you need to bridge that gap and you need to do it quite urgently.”

Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.

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