Denied the opportunity to spend on travel, dining and entertainment, and boosted by a surging stock market and an unprecedented gusher of federal spending, Americans saved about $3.7 trillion during the Covid-19 pandemic, according to a new study by Oxford Economics. Most of that money, however, has ended up in the pockets of those who were already well off.
Oxford found that 70% of the savings during the pandemic went to the top 20% of households in terms of wealth. And when looking at “excess savings” – the money saved at a rate higher than the pre-pandemic trend would suggest – the numbers are even starker: The top 20% claimed 80% of excess savings, with the top 1% claiming nearly half, or 47%.
The study also found that households in the bottom 20% saved less than expected during the crisis, relative to their pre-pandemic pattern.
“This latest data suggests that savings are even more skewed to the top than we previously thought,” Oxford’s Nancy Vanden Houten told CNBC.
How much will they spend? The findings could have implications for the ongoing and so far uneven economic recovery. Oxford economists expect Americans to spend about $360 billion of their excess savings over the next 18 months, with the top 20% spending about $250 billion. That means the recovery could depend in large part on the willingness to spend by the wealthy.
“This is unprecedented,” Vanden Houten said. “There are some limits in spending. Will wealthy people go on two vacations instead of one because they missed one in 2020? Or will they just take one more elaborate vacation? We don’t know.”