Coronavirus Pandemic Exposes Americans' Lack of Savings
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How has the coronavirus pandemic revealed Americans' lack of emergency savings?
Here's your Money Briefing for Wednesday, April 15th. I'm J.R. Whalen for The Wall Street Journal. The coronavirus pandemic has exposed a chronic problem. Most Americans have little or no savings.
We are, in fact, the richest country, but historically Americans just haven't saved very much. You know, regardless of where they are in the income distribution, it's just something that Americans just haven't done much.
That's Wall Street Journal reporter David Harrison. Coming up, he'll explain why economists think that Americans don't save as much as they should and why savings accounts were dwindling long before the pandemic.
The lowest earning U.S. households have less money in their checking and savings accounts now than they've had in more than 30 years. But Americans across the income distribution haven't been saving as much as they should.
Which groups of households entered the pandemic most financially vulnerable?
And that's money that might have come in handy during the economic downturn. Wall Street Journal reporter David Harrison joins us to discuss. So, David, the pandemic has hit hardest a segment of the population that barely had enough money to put away.
Yeah, that's right. So, you know, when this hit, it kind of brought to an end 10 years of low unemployment and 10 years of strong economic growth. But, you know, all that growth really didn't do much to help sort of lower earners, lower income households put a lot of money aside. So, you know, despite the strong economy over the past few years, they were in a pretty vulnerable position going into this.
Now, you spoke with several low-wage workers about their experience leading up to the pandemic and during the pandemic. What did they tell you?
In a lot of cases, what I heard was that their jobs, you know, paid them enough to live on, but they didn't pay them enough to save anything.
What did low-wage workers say about their ability to save before the crisis?
So, you know, a number of them devoted a lot of their earnings to rent, to sort of copays, to medical copays, to groceries. But, you know, in a lot of cases, they just couldn't put a lot of money aside to either for sort of long-term things like retirement or for sort of short-term emergencies. And so when this happened, when they lost their earnings or they lost their jobs or their hours were cut back, they just didn't have very much to fall back on.
And millions of U.S. households, in addition to low-wage households, had seen their savings take a hit before the pandemic.
Yeah, that's right. So the sort of the financial assets of kind of the lowest earners, the bottom 20%, had actually been going down since the last recession. And that's financial assets. So that includes basically, you know, all your investments, your retirement funds, and sort of anything in your bank accounts. So yeah, so those have been going down quite dramatically in the last few years. And
Why have financial assets for the lowest earners declined since the last recession?
There are a number of reasons for that that economists have identified. First of all is that incomes have been growing pretty slowly. If you're not getting a big raise every year, you're not able to put a whole lot aside. And also, don't forget that the last recession was caused by a huge run-up in debt, in household debt, by the housing bubble. And so a lot of people basically spent the years following the recession paying down that debt. There were a few years where people were talking about deleveraging, where households were were kind of, were paying off their debt. So you had that in the years after the recession, which, you know, if you're not, if you're paying off debt, that's money you can't set aside for savings.
So basically those two factors meant that a lot of lower income households just didn't have anything left over to set aside.
Do you get the feeling that the record low unemployment we saw over the past year and a half or so had given savers a false sense of security?
Might have, yeah. I mean, not just savers, but everybody else too.
What economic factors do experts cite for persistently low U.S. saving rates?
I mean, you really, you know, you saw that if for whatever reason you lost your job, it was pretty easy to get another one. And, you know, it was pretty easy to move from job to job. And so, you know, if you're paying the bills, if you're able to afford, you know, to afford your rent, if things are going pretty well, you're not going to be
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Chapters
6 chapters
1
How has the coronavirus pandemic revealed Americans' lack of emergency savings?
0:05–0:56
2
Which groups of households entered the pandemic most financially vulnerable?
0:56–1:50
3
What did low-wage workers say about their ability to save before the crisis?
1:50–2:44
4
Why have financial assets for the lowest earners declined since the last recession?
2:44–3:38
5
What economic factors do experts cite for persistently low U.S. saving rates?
3:38–4:36
6
What lessons and realistic steps can households take to rebuild savings after the downturn?
4:36–5:06
Speakers
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