5 ways to hold onto what’s left of your pandemic savings

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Published on June 09, 2023 | 4 min read

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Americans have already spent around 35 percent of the savings they’d built up during the pandemic, according to a recent Goldman Sachs report. For many, reduced savings ultimately has led to a smaller emergency fund and increased credit card debt.

One reason many consumers spent down their savings was decades-high inflation, which peaked in June 2022, resulting in sky-high prices on everything from rent to gasoline to food.

When you fast-forward to today, inflation has cooled somewhat, yet prices are still higher than they were pre-pandemic — causing many to dip into their savings further, as well as cut back on spending or add to credit card balances.

Here we’ll go over a few reasons to hold onto what’s left of your pandemic-era savings and provide tips on how to keep from spending those funds.

How the pandemic increased the savings rate

Many consumers’ savings accounts had become flush with cash starting in 2020, thanks to government stimulus payments as well as reduced spending due to social distancing. American households received more than 476 million payments — totaling $814 billion — in stimulus checks during the pandemic, the federal government reports.

The U.S. personal savings rate was at a record high of 33.7 percent in April 2020, and households had amassed around $2.3 trillion in savings by the summer of 2021, according to the Federal Reserve.

Consumers’ savings have dwindled

A bankrate survey released in January 2023 found that nearly 4 in 10 Americans (39 percent) reported having less emergency savings than they did one year prior. More than one-third (36 percent) reported having more credit card debt than emergency savings, while nearly three-quarters (74 percent) said economic conditions were causing them to save less.

While inflation is down from its June 2022 peak of 9.1 percent, the Bureau of Labor Statistics reports consumer prices in April 2023 rose 4.9 percent, which is still more than two times the Fed’s target rate of 2 percent. From April 2022 to April 2023, many costs of living have risen considerably.

Elevated prices on things like rent, groceries and electricity are one reason people have had to dip into their savings.

Price increases between April 2022 and April 2023:

Shelter: 8.1%
Electricity: 8.4%
Food: 7.7%
New vehicles: 5.4%
Apparel: 3.6%

How to keep your savings intact

Resisting the urge to tap into your savings for unnecessary purchases can really help you in a pinch, considering the cost of living is still elevated and economists predict an uptick in job losses and unemployment over the next year.

Experts recommend keeping an emergency fund of at least three to six months of living expenses. This money is best kept in a high-yield savings account, where it will earn some interest and be easy to access, if needed. Having this nest egg will help keep you out of debt if you’re suddenly out of a job or faced with unplanned expenses.

Here are a few more ways to hold onto those savings.

1. Follow a budget

Watching your spending carefully is possibly the single most important thing you can do to make sure your savings remain intact — and that you don’t go into credit card debt. Since the idea of following a budget can feel overwhelming to many, consider simplifying the process with a handy smartphone budgeting app.

The bottom line is you want to make sure you’re living within your means by not spending more than you’re earning each month. Also, budgeting helps you continually build up your emergency fund or save for other goals.

2. Automate your savings

In addition to a budgeting app, another way you can use technology to help you save money is by setting up recurring transfers from your checking account to your savings account. Many banks offer this option through their websites or apps.

Once you use your budget to determine how much money you want to set aside each month, just set up a recurring transfer from your checking account to your savings account each payday. Once you get used to it, chances are you won’t even miss the money.

3. Prepare for a possible job loss

One-third of workers are worried about their job security, Bankrate’s 2023 job seeker survey found. There are things you can do while still employed to provide a safety net and plan of action in case you were to suddenly find yourself jobless.

In addition to making sure you have several months of living expenses in the bank, you can also find other income streams. A side hustle gives you the chance to earn some money while doing something you enjoy, whether that’s photography, pet sitting, freelance writing or tutoring. It can also serve to supplement any lost income, if need be.

4. Consider a CD

If you have a healthy emergency fund and some additional funds to spare, consider opening a high-yielding CD. Since CDs lock in your money for a set term (withdrawing the funds sooner usually results in a penalty), you’ll be less tempted to use the money for impulse purchases.

When shopping around for a CD, be sure to compare rates across terms. These days, you’ll often find one-year CDs are out-earning their five-year counterparts. Besides, CDs with terms as short as 12 months give you access to the funds relatively soon — so you can reinvest the money or use it for a planned purchase.

5. Avoid credit card debt

If you find yourself with a high credit card bill, the inclination to tap your savings to pay for it will be strong. As such, it’s best to watch your spending closely so as not to put more on your credit card than you can pay off every month. This will ensure you won’t carry a balance and be hit with the interest charges that go along with it.

Bottom line

In shaky economic times, what’s left of your pandemic savings can definitely come in handy in a pinch. In the meantime, keeping these funds intact can be a challenge, but it’s possible to do so when you follow a budget, add more to your savings over time, and try to avoid credit card debt.

Having extra money in the bank provides some financial security and peace of mind, and you’ll sleep more soundly knowing you’re covered in case of an emergency.