If you’ve made a New Year’s resolution to boost your savings account in 2022, you are not alone. In a recent Fidelity survey, 43% of people considering a financial resolution said saving more money was one of their goals.
Americans’ the savings are gone over the past two years. The personal savings rate – the percentage of disposable income Americans save each month – has peaked at a staggering level 33.8% in April 2020 because so many of the things we were used to spending money on, such as restaurants, entertainment, shopping, and vacations, were not available during the early days of the pandemic.
Savings rates declined slightly as the economy reopened, but remained extremely high by historical standards for months.
In November, this figure had fallen to 6.9%, its lowest level since December 2017. This is because the landscape for savers evolves rapidly, and there’s a good chance it will be even more difficult to save money in 2022.
Here are some of the reasons it may be harder to save this year.
Consumer prices in the United States are rising at a record pace thanks to a huge increase in demand for goods alongside an ongoing global supply chain crisis, and the situation has only been made worse by a persistent labor shortage. In November, prices were 6.8% higher than at the same period the previous year, with inflation in certain categories, such as Meat and gasoline, significantly higher than that.
The Federal Reserve is expected to withdraw support for the economy over the next few months to help prices stabilize again (more on that later), but the process will be slow.
In the meantime, get ready to pay more in 2022 for basic necessities like groceries, gasoline, clothes and even. domestic heating costs and junk food like Oreos and Sour Patch Kids. What if you need to make a large purchase, like to buy a car Where residence, be prepared for particularly high prices.
No more stimulus checks and relief money
In the past two years, Congress has authorized three rounds of federal stimulus payments to help Americans weather the pandemic. Experts say the windfall from those payments – capped at $ 1,200, $ 600 and $ 1,400 per person – has reduced debt, strengthened savings accounts and even helped lift families out of poverty.
As part of the American Rescue Plan in March (the same bill that authorized the third dunning check), Congress authorized a major project, albeit temporary, expansion of the child tax credit (CTC) for 2021.
The expansion increased the maximum credit value from $ 2,000 to $ 3,600 per child and allowed eligible parents to receive half of their credit in six monthly installments. The last child tax credit prepayment of 2021 hit parents’ bank accounts in December.
A survey conducted by the Social Policy Institute at the University of Washington last summer, found that nearly three-quarters of parents were preparing to receive the planned credit by using it to bolster their emergency savings.
The CTC will not go away completely in 2022, but for now it is expected to drop back to $ 2,000, and parents will no longer receive the money in advance monthly payments.
The Biden administration and some congressional leaders have argued that the extended credit payments should be continued until 2022, but no action has been taken. And while nothing is impossible, a fourth dunning check is not likely.
As a result, many Americans will likely no longer see these additional federal relief payments in 2022, although qualifying parents will still see the other half of their CTC credit expanded on the tax returns they file this year.
Student loan repayments are likely to resume
During the pandemic, the federal government froze student loan payments and accrued interest for federal borrowers. This freeze has been extended several times, more recently until May 1, 2022.
There is no doubt that the suspension of payments was a a godsend for millions of borrowers. A survey conducted by Pew Charitable Trusts last summer found that 59% of borrowers who stopped paying during the break used the money mainly for essential expenses like food and rent. Interestingly, only 9% of those surveyed said the extra money was spent on savings.
Despite pressure from progressives and supporters of a further extension of the freeze or a student loan forgivenessAt present, it appears that borrowers should plan to start repaying their loans again in the spring.
Low interest rates for savers
In March 2020, the Federal Reserve lowered its benchmark interest rate to near zero in order to keep the markets buzzing and avoid an economic collapse. In the months that followed, banks across the country cut their own rates to stay competitive.
While interest rate cuts in banks are normal during an economic downturn, they also mean your money in savings accounts earns much less than in good times.
The spur of the sharp rate cuts was particularly painful for customers of online banks like Marcus, Ally and Axos, who had wooed consumers with the promise of high-yield savings accounts that paid interest rates of 2% and more, compared to fractions of a percent at traditional banks. From now on, the prices of best high yield savings accounts vary between 0.3% and 0.5%.
The Fed is expected to slowly start raising rates again this year, but it can take years so that consumer bank interest rates rise again.
© Copyright 2021 Advertising Practitioners, LLC. All rights reserved.
This article originally appeared on Money.com and may contain affiliate links for which Money receives compensation. The opinions expressed in this article are those of the author alone, not those of any third party, and have not been reviewed, endorsed or endorsed in any way. Offers may be subject to change without notice. For more information read Money disclaimer.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation for clicking on links in our stories.