Americans are hoarding cash because of fatigue and uncertainty, with little chance the trend will reverse soon. Over the past two years, households have socked away close to $1.6 trillion in “excess savings,” according to the Federal Reserve Bank of New York. The funds are well beyond the three to six months of emergency savings generally recommended by financial advisers.
While the savings rate has dropped back to 2019 levels after four consecutive quarters of record high savings, financial advisers, money managers and economists say Americans are too nervous about potential worst-case scenarios to dip into their funds. And now, with the Omicron variant of the coronavirus threatening to disrupt stability once again, many of them expect the cash hoarding to continue. “I have been one of the more optimistic ones, but with this new variant now on the horizon, I think we’re in for more of the same of what we’ve seen over the last six months,” says Wendy Edelberg, director of the Hamilton Project at the Brookings Institution.