Americans Are Draining Their Savings Accounts at a Rate Not Seen Since the 2008 Crash and Economists Are Scared
Americans have been under growing financial pressure in 2024 as inflation, credit card debt, and higher interest costs continue to squeeze household budgets. The latest sign is the drop in the U.S. personal saving rate, a closely watched measure that shows how much income households are setting aside after spending.
The latest numbers show savings are getting thinner
The U.S. Bureau of Economic Analysis reported on June 28 that the personal saving rate was 3.4% in May 2024. That was down from 3.6% in April and well below the levels many households maintained earlier in the recovery from the COVID-19 downturn.
The same BEA release said personal income rose 0.5% in May, while personal consumption expenditures increased 0.2%. Even with income still rising on paper, the gap between earnings and day-to-day costs has left less room for many households to build cash reserves.
Oxford Economics said in a June 2024 note that lower-income households have largely exhausted the extra savings built up during the pandemic. Moody’s Analytics chief economist Mark Zandi has also said in recent months that many families are relying more heavily on credit as excess savings disappear.
What this means for households across the U.S.
The BEA data is national, and it does not break out personal saving rates by state in the monthly report. That means there is not yet a confirmed state-by-state list showing where savings are falling fastest, including in large states such as California, Texas, or Florida.
Still, other national data points show the same strain. The Federal Reserve Bank of New York said total U.S. credit card balances reached $1.12 trillion in the first quarter of 2024, up $13 billion from the prior quarter, a sign that many households are covering more expenses with borrowed money.
Bankrate reported in 2024 that more Americans are carrying month-to-month card balances as rates remain elevated. For families dealing with rent, groceries, insurance, and child care costs that all remain higher than they were in 2021, smaller savings cushions can leave less flexibility for emergencies or big bills.
Why economists are watching this so closely
The concern is not only that savings are down, but that they are down while borrowing costs remain high. The Federal Reserve kept its benchmark interest rate in a range of 5.25% to 5.50% at its June 2024 meeting, which has helped keep credit card and other consumer borrowing rates elevated.
The personal saving rate is still above the 2.7% level seen in June 2022, but it remains historically weak by long-term standards. During the 2008 financial crisis, the saving rate moved sharply as households pulled back spending and tried to rebuild cash, making today’s low readings a closely watched signal.
For consumers, the practical takeaway is straightforward. Federal data shows households are still spending, but the margin for saving has narrowed, and economists at firms including Oxford Economics and Moody’s Analytics have said that trend could make consumer finances more vulnerable if job growth slows or prices stay high through the rest of 2024.
