Cash & Deposits Commentary

The COVID Savings Surge, and Its Disappearance

Between April 2020 and August 2021, American households accumulated approximately $2.1 trillion in excess savings. Stimulus payments, enhanced unemployment benefits, and dramatically reduced spending (restaurants closed, travel halted, commutes eliminated) created a historic accumulation of cash.

By mid-2024, those excess savings were largely depleted. The drawdown was not uniform, higher-income households retained their buffers while lower-income households spent through theirs more quickly, often simply catching up on deferred expenses and absorbing the impact of inflation.

The High-Yield Savings and Money Market Boom

The Federal Reserve's aggressive rate hikes in 2022–2023 created an unusual situation: cash became a competitive asset class. High-yield savings accounts began offering 4–5% APY, and money market fund assets surged past $7 trillion, a record. For the first time in over a decade, savers were being meaningfully compensated for holding cash.

This shift was particularly significant for retirees and conservative investors who had spent years earning near-zero returns on their deposits. The $7 trillion in money market funds represents an enormous pool of sidelined capital that could, in a different rate environment, flow into riskier assets like stocks and bonds.

The Savings Rate at Historic Lows

The personal savings rate (the percentage of disposable income that households save rather than spend) stands at just 3.6% as of December 2025. This is well below the historical average of roughly 8–10% and represents a structural decline in American saving behavior that has been underway for decades.

The reasons are multiple and reinforcing: stagnant real wages for many workers, rising housing and healthcare costs consuming a larger share of income, the availability of easy credit, and a consumer culture that prioritizes spending. The low savings rate is both a symptom of financial stress for some households and a choice enabled by wealth effects for others.

Bank Deposit Concentration

The four largest U.S. banks (JPMorgan Chase, Bank of America, Wells Fargo, and Citibank) hold roughly 40% of all domestic deposits. This concentration has implications for systemic risk, competition, and the rates offered to depositors. The regional banking stress of March 2023 highlighted how quickly deposits can move when confidence is shaken.

For individual savers, the FDIC insurance limit of $250,000 per depositor per institution provides a safety net. But the broader question of whether excessive deposit concentration in a handful of institutions creates fragility in the financial system remains unresolved.