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Low-income U.S. households are spending savings quicker than high earners: study

Published 01/01/2021, 07:57 PM
Updated 01/02/2021, 12:52 AM
© Reuters. FILE PHOTO: People line up to receive free holiday boxes of food in New York

© Reuters. FILE PHOTO: People line up to receive free holiday boxes of food in New York

By Jonnelle Marte

(Reuters) - U.S. households across the board built up savings during the pandemic, but low-income households are burning through their cash more quickly than higher-income families and could be out of savings soon if more aid is not delivered, according to a study released on Wednesday.

By the end of October, the median low-income family spent 64% of the extra cash they accumulated this year compared with last year, leaving them with about $236 in extra cash, according to a report released Wednesday by the JPMorgan Chase (NYSE:JPM) Institute. In contrast, higher-income households lost just 38% of the cash cushion built up this year, and had a median $810 in savings, the study found.

"If these trends continue, we would expect low-income families to deplete their account balance gains sooner than their high-earning counterparts," researchers noted in the report.

(GRAPHIC: Cash piles shrinking - https://graphics.reuters.com/USA-ECONOMY/rlgpdqoabvo/chart.png)

The JPMorgan Chase study showed that cash balances appeared steady on average after rising earlier this year, in line with a separate report released by the Federal Reserve last week showing that balances in cash, checking accounts and savings deposits rose over the three months ending in September to a record $13.4 trillion.

But a look at cash balances for the median household - which is not affected as much by households with abnormally high, or unusually low, account balances - showed a more volatile experience.

The median cash balance for checking account holders studied by JPMorgan Chase rose in the spring when the government distributed cash payments to most households - and balances have been declining since.

Those households could experience another substantial drop in income and spending at the end of the year when unemployment benefits are set to expire for millions of workers participating in pandemic programs created by the CARES Act, the researchers said.

Consumers have previously cut spending on non-durable goods by 12% after losing unemployment benefits, and those receiving jobless benefits reduced spending by 14% over the summer after a $600 weekly supplement to unemployment benefits expired at the end of July, the study noted.

© Reuters. FILE PHOTO: People line up to receive free holiday boxes of food in New York

Lawmakers have yet to reach an agreement on another round of aid. Some COVID-19 relief measures could be attached to a critical spending measure that must be passed by Friday to avoid a federal government shutdown.

Latest comments

breaking news! water is wet
Can we prohibit all these communist Chinese people from even accessing investing.com? They read and get info from English written articles yet they look down on you.
they spent on we. ed
they spent on ****
The average Americans before the pandemic, has about $600 in their account... now it is approaching zero and waiting for a handout, while the upper 20% have money in Tesla and Bitcoins...
They should have put money into the stock market
Lol. This has to be the most obvious headline i have ever read
It needed a STUDY to arrive at this conclusion? :)
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