Americans Are Sitting On A Record Amount of Cash
September 23, 2021
The wealth of U.S. households hit a new record, driven by increasing home values and stock holdings.
The Federal Reserve reports that the net worth of U.S. households was $134 trillion in the second quarter, up from $128.4 trillion in the first quarter. In the fourth quarter of 2019, just before the pandemic began, that figure stood at $110 trillion.
Though much of that increase in wealth came from gains in stock prices and the value of people’s homes, household cash holdings also rose significantly. The amount of cash and cash equivalents on household balance sheets rose to $16.5 trillion in the second quarter. This is up slightly from $16.3 trillion in the first quarter, but up substantially from $12.7 trillion at the end of 2019.
This is likely due to the substantial relief and stimulus efforts of the government and how much consumers reduced spending in the early part of the pandemic. However, it seems that some of these thrifty habits may have endured. According to the Commerce Department, in July people saving 9.6% of their after-tax income. In the five years prior to the pandemic, the savings rate averaged 7.4%.
Economists had assumed that consumers would unleash this cash in a tidal wave of spending in the second half of the year, but as the Delta variant kept case numbers high and Covid restrictions in place, it remains to be seen when Americans will feel comfortable opening their wallets again.