People saved a ton of money during the pandemic. That didn’t necessarily increase their wealth – KERA News

Leigh Phillips has had a unique window into the pandemic’s impact on household finances.

Phillips heads the nonprofit SaverLife, which helps people build savings using incentives on the program’s app to, basically, make saving and budgeting into a game. SaverLife’s 600,000 clients are mostly women, many are mothers, and they’re mostly lower income.

When COVID-19 hit, Phillips saw how the shutdowns and work disruptions upended client finances. She was able to track how waves of federal financial relief, like stimulus payments and expanded unemployment benefits, helped people stabilize.

Then, in the second half of 2021, monthly payments from an expanded child tax credit started landing in bank accounts. Even as inflation was heating up, her clients were able to get by.

“That was an incredible boon for the families of SaverLife,” she said. “During that period of time, savings balances remained stable, even though expenses were going up, but also people were keeping up with their bills.”

Short-term gains

SaverLife’s clients put an average of $8,000 into savings accounts in 2021, four times the amount they saved in 2019. But that still only translated to about $200 in increased wealth at the end of the year.

A fast-increasing cost of living ate away at savings, Phillips said. But the nature of many lower-paying jobs is also to blame.

For a lot of workers, earnings can vary by several of dollars each month, depending on how many hours they work, the tips they earn, or if they have to take unpaid time off for illness or to cover childcare. So, Phillips said people are most often “saving for soon” – they build savings to manage the next income shortfall or the next major expenses, like car repairs or back-to-school purchases.

“When you have more, you put some away as a buffer against what you know is coming,” Phillips said. “People save their tax refunds, they save the stimulus checks, they put money into savings when they can. But it’s not resulting in gains in wealth because people’s finances are such a roller coaster.”

Looking for help

Now, with inflation slamming American wallets, family budgets are stretched thin. In response, personal savings rates nationally are now well below pre-pandemic levels, and more people have been turning to friends and family to make ends meet.

About 30 million people borrowed money from loved ones to get by in early July, according to the most recent Census Bureau snapshot of people’s financial hardship during the pandemic indicates.

“Millions more in 2022 are borrowing from friends and family than before, which to me can mean a couple of different things,” said Joanna Smith-Ramani, …….

Source: https://www.keranews.org/business-economy/2022-08-05/people-saved-a-ton-of-money-during-the-pandemic-that-didnt-necessarily-increase-their-wealth