The theme this week on the One Minute Retirement Tip is 2021 Economic Predictions. I’m sharing with you 5 key takeaways from our virtual client event with economist, John Mitchell. 

Today, I’m talking about skyrocketing savings. This one is a bit interesting, considering yesterday’s topic about forbearance and the 90 million people who moved into poverty in 2020. But one of the unique realities of the Covid recession is that this recession was very different for many households than it was for your typical waiter, hair stylist, or hotel clerk. Those people were decimated in the Covid recession. 

But overall, what’s really interesting is that the savings rates skyrocketed among consumers. The savings rate as a % of income was 34% in April 2020 & still around 13% in November 2020. 

Why is that? Well, if you were able to continue to work and transition to working from home during Covid, you still had a job and an income, but since you were stuck at home, you had nowhere to spend your money. 

No travel. No eating out. No drinks with friends. The only thing you may have been buying was toilet paper commemorative earnings and flour to make your own bread. I still don’t understand either of those trends - or those cute 2020 Christmas ornaments with toilet paper on them. I don’t know about you but I don’t want to be reminded of Covid every year whenever I look at my Christmas tree. I shudder to think about it. 

But the lack of spending among those of us that remained employed throughout the Covid recession skyrocketed our collective savings rates. And this significant increase in savings and cash hoarding could be a catalyst for a recovery in spending, and fuel economic growth in 2021. 

If you’re still employed you’ve probably got money burning a hole in your wallet, and as soon as you’re vaccinated and the restrictions lift, plane tickets and lavish steakhouse dinners are soon to come. 

By the way, this same cash hoarding could also be good for stocks and other asset classes in 2021 as investors become more comfortable putting cash to work. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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