Many households have been financially distressed during the COVID-19 pandemic, struggling to pay for necessities such as rent and groceries. It may seem surprising, then, that the aggregate personal saving rate has actually increased since the start of the pandemic.

The FRED graph above displays the U.S. personal saving rate from June 2009 to the present. As defined by the Bureau of Economic Analysis, personal savings are income left over after people spend money and pay taxes. The personal saving rate is personal savings expressed as a percentage of disposable personal income. From the end of the Great Recession to February 2020, the personal saving rate has averaged 7.25%; since the start of the pandemic, however, it has averaged 17.9%.

There are several reasons for this increased average saving rate:

• Households practicing precautionary saving during an economic downturn
• Inability to spend money due to business closures and social distancing guidelines
• Stimulus checks (or relief payments) distributed to a large majority of U.S. households

The FRED graph shows the spikes in the personal saving rate (dotted vertical lines) that correspond to the timing of the stimulus checks distributed in April 2020, January 2021, and March 2021. (Note that the months of distribution aren’t necessarily the same months in which the stimulus/relief bills were passed.) Many households spent their stimulus checks on necessities or other goods and services. But due to the broad nature of relief check/stimulus payment eligibility, some households that received payments didn’t need or want to spend the extra disposable income immediately; rather, they saved it. According to the Household Pulse Survey conducted by the U.S. Census Bureau, 14% of households mostly saved their stimulus check in the first round of payments, 26% did so in the second round, and 32% in the third round.

Though the overall saving rate spiked following these payments and has remained higher than usual throughout the pandemic, this aggregate measure of the personal saving rate does not reflect the variability of household financial stability within the income distribution. Low-income households have been disproportionately affected by financial hardship during the pandemic, and many of those households have had to either draw on savings or go into debt, which is not reflected in the aggregate personal saving rate. Moreover, these households were already less likely to be able to save. According to Survey of Consumer Finances data from 2019, about 37% of families in the lowest quintile of the income distribution reported saving some portion of their income over the previous 12 months. About 86% of families in the highest decile of the income distribution reported doing so.

How this graph was created: Search FRED for “personal saving rate” and select the series “PSAVERT.” The default graph will be the monthly personal saving rate as a percent. Use the date range boxes to set the beginning date to “2009-06-01.” From the “Edit Graph” panel, use the “Add Line”/“Create user-defined line” tool to add the lines indicating the passage of each stimulus check, with the following dates: 2020-04-01, 2021-01-01, and 2021-03-01. Set the lines’ starting and ending values to 0 and 35 to produce vertical lines at each of the dates. To change the colors and line style, use the “Format” tab.

Suggested by YiLi Chien, Cassandra Marks, and Julie Bennett.