- Of those earning $US100,000 or more, 59% have increased their savings during the pandemic, MagnifyMoney found.
- Only 28% of those making less than $US35,000 saved more.
- It’s evidence of America’s K-shaped recession, in which the wealthy are recovering and others are struggling.
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High earners are continuing to fare well during the pandemic.
Fifty-nine per cent of those with a household income of $US100,000 or more have increased their savings, a new MagnifyMoney study found. By comparison, only 28% of those earning less than $US35,000 were able to save more. (The study surveyed 1,200-plus Americans in December.)
The savings cushion has created a sense of optimism for the six-figure households, 46% of whom think they will have more money in savings this time next year, per the survey. That compares to 28% of those making less than $US35,000.
That’s likely because 41% of those earning less than $US35,000 decreased their savings during the pandemic, compared to 17% of six-figure earners.
Fewer things to spend on and a strong stock market
With the experience economy shut down and solitary leisure taking up a larger chunk of consumer spending, higher-income Americans have consistently been spending lower percentages of their income than lower-income Americans. They have also benefited from a strong recovery in the stock market, which finished the year on a record high.
In March, Federal Reserve Chairman Jerome Powell implemented a policy known as quantitative easing, in which the central bank essentially bought its own debt, making credit more readily available in the wider economy. Companies in sectors heavily impacted by the pandemic rushed to raise new funding, and Powell also kept interest rates low to encourage spending.
This flood of money set the stock market on a path to recovery after a dramatic drop in the early moments of the pandemic, as the wealthy were incentivized to pump money into the stock market as they sought returns. Relatedly, America’s household wealth hit a record high of $US123.52 trillion in the third quarter.
Meanwhile, many Americans were left waiting out eight months of political gridlock before a second stimulus package was passed, with individuals falling into poverty and many small businesses closing their doors. Some had to dip into the savings they did have to cover Christmas expenses before the post-holiday rollout of stimulus checks.
It’s no wonder, then, that their bank accounts are looking a lot skinnier than those on the other side of the wealth gap.
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