Americans Reallocate Savings, Fueling Economic Resilience
Shift to Higher-Yield Accounts Explained as Spending Stays Strong
Americans are increasingly moving their money out of traditional checking and savings accounts and into investment vehicles offering better returns. This trend is helping to underpin the U.S. economy’s surprising strength amidst high inflation and trade uncertainties.
Cash Reserves See Total Growth
New research from the JPMorgan Chase Institute, analyzing 4.7 million households, reveals that while balances in checking and savings accounts have remained relatively stagnant on an inflation-adjusted basis, overall cash reserves are rising. This expansion is driven by increased allocations to brokerage accounts, money market funds, and certificates of deposit.
“Families across many income bands are now seeing a turnaround in their total cash.”
—Chris Wheat, President of the Institute
Chris Wheat, president of the institute, noted that this reallocation provides a clear explanation for robust consumer spending. He stated it had been “hard to square the circle” of strong spending without apparent growth in traditional deposit accounts.
This shift suggests individuals are actively managing their finances in the current high-interest-rate environment, using these yield-generating accounts more for cash management than for long-term investment, according to the analysis.
However, Wheat cautioned that the duration of this trend remains uncertain, as the institute currently lacks sufficient data to predict its continuation.
Lower-Income Households Benefit
The analysis also highlighted that households earning generally less than $35,000 annually have experienced a total cash balance increase of 5% to 6% year-over-year. While the lowest income quartile typically holds just over $1,000 in checking and savings, the highest income quartile sees median balances exceeding $8,000.
This financial resilience is further supported by a recent report indicating that personal savings rates in the U.S. remained at a healthy 3.9% in April 2024, above pre-pandemic levels (Bureau of Economic Analysis, May 31, 2024).
