There’s been a lot of talk about “excess savings” running out, with predictions that consumers are about to hit a financial wall. But newer data tells a different story: U.S. consumers may actually have much more cash on hand—possibly over $3 trillion more than previous estimates.
The traditional “excess savings” metric mainly looks at cash levels relative to pre-pandemic baselines, missing key contributors like capital gains and dividends. Recently, the San Francisco Fed introduced a new approach called “liquid wealth,” which measures actual balances in checking, savings, and money market accounts. This metric reveals that cash levels are not only holding steady but remain significantly above pre-pandemic norms.
Since 2019, consumer cash in checking accounts has surged from $1.5 trillion to over $5 trillion, and savings accounts are nearly $300 billion above pre-pandemic levels after adjusting for inflation. Unlike past recessions, COVID saw a jump in U.S. net worth, with an increase of $13.5 trillion in 2020 alone—a trend that has continued since.
Capital gains also add to this cash pile. Between 2020 and 2023, realized gains brought in nearly $5 trillion (after taxes) to consumer balances. These gains are a substantial boost that traditional metrics have not fully accounted for, painting a stronger picture of consumer financial health.
With these cash reserves, consumers are well-positioned to keep spending, which supports economic growth and eases recession fears. And while credit card debt has risen, household debt payments relative to income remain consistent with pre-COVID levels, suggesting this is a return to normal rather than a warning sign. This adds to other positives for the consumer such as the unemployment rate staying low and our wages outpacing inflation. Retail sales are high and declining interest rates should help ease consumer stress.
In short, the U.S. consumer might be in far better shape than previously thought. This financial strength could continue to support spending and growth for longer than many expect.
Written by: Linda Wang
