Even though many people are hurting financially because of the coronavirus pandemic, banks and credit unions saw a big increase in savings.
“When the pandemic hit consumers, our members began to save,” said Todd Lane, CEO of California Coast Credit Union. “We have seen personal savings rates in 2020 that are double, almost double, from what we saw pre-pandemic.”
That saving rate is measured as what percentage of your income you are saving. Lane said in 2019 the rate was about 7%, but in April of last year, it jumped to 34% before slowly falling. Last month, CCCU saw a savings rate of 13.6%.
Lane said the pandemic changed how people used their money.
“They cut expenses,” said Lane. “Discretionary spending really fell off. Same for travel and leisure and restaurants.”
Other local banks and credit unions saw the same trend.
“Since the pandemic began last March, Mission Fed Credit Union has experienced record year-over-year growth in deposit balances, exceeding 20%,” read a statement from Mission Fed’s CFO Doug Wright. “Each time the government stimulus checks have been issued, we’ve seen a strong increase in deposits.”
Lane said a lot of people saved the first and second stimulus checks, and are now spending the third one.
“We have not seen savings like that for many, many decades,” said Lane. “Consumers put off buying that new car and have been very disciplined about using their credit cards.”
Both Mission Fed and CCCU told NBC 7 they were seeing people make saving a priority, even putting that money into retirement savings accounts like a 401k or Roth IRA.
And it isn’t just the stimulus checks. The pandemic seems to have changed people’s priorities.
“Regardless of whether our members received stimulus funds or not, many of them have prioritized savings this past year,” said Wright. “While we anticipate some of these funds will be used as the economy opens up, we expect that much of it will continue to be saved, based on past experience.”
Lane said this doesn’t mean people are well off financially, just that their priorities have changed.
“We just don’t know what is going to happen yet,” said Lane. “Are they going to rush out and buy consumer goods? Or are they going to keep it for that next rainy day?”
If you can, Lane suggests putting as much away for a rainy day as you can. He recommends the rule of three when it comes to budgeting. That means a third of your money after necessities goes to savings, a third to debt, and a third to personal needs and wants.
“Is the financial health of consumers really as good as that personal savings rate indicates?” asked Lane. “I’m not convinced at this point.”