There's a $5.5 Trillion Hole in Americans' Savings. Here's How to Boost Yours

What happened

The amount of money in Americans' savings accounts has fallen by $5.5 trillion since April 2020, according to Barchart. The financial data providers tweeted, "U.S. personal savings have fallen to lower levels than before the pandemic began." 

So what

Many people used pandemic-era stimulus checks to boost their savings, pushing balances to unprecedented levels in 2020 and 2021. Since then, surging living costs have caused many households to dip into their reserves. Unfortunately, that cash is now starting to run out.

There are two ways this could impact your finances. 

1. Economists fear the steep reduction in savings could signal an impending recession. You may feel as if the storm clouds of a recession have been gathering for over a year. The difficulty is that, per Business Insider, consumer spending is one of the factors keeping the recession storm at bay. A drop in that spending could be the last straw.
2. Without savings, it could be harder for Americans to weather any economic difficulties. 

Now what

If you've had to use your savings to stay afloat, you're not alone. An April report from Pymts.com showed that around 60% of Americans are living paycheck to paycheck, and around 20% of them said they'd recently spent a significant amount of their savings. 

In short, many of us don't have a lot of financial wiggle room. This could be problematic, as economic downturns often cause job losses and hiring freezes. Boosting your savings before a potential recession would make you better able to handle whatever unfolds. 

Here are four steps to take:

• Make a budget: If you find the word "budget" off-putting, try to rethink it. It might be less scary to view it as understanding where your money goes. Using a budgeting app might help. Alternatively, sit down with your recent bank statements and map out what you spend and earn.
• Cut unnecessary spending: Whether it's shaving your grocery costs or finding ways to reduce your utility bill, any reduction in your monthly costs could translate into a savings boost. The average American household spends over $200 on subscriptions, so perhaps there are one or two you can live without. 
• Look for ways to increase your earnings: Might you be able to take on extra hours at work? Or take on a side hustle? Perhaps you have space (whether a room, storage, or parking) you might rent out. There's only so much you can cut back, but there may be several ways you can earn more. 
• Pay down debt: If you're carrying a balance on your credit card, the interest payments can eat into your available income and add up over time. 

Many Americans have used their savings to stay afloat in recent years, but it isn't sustainable and that money is running out. Look for ways to save more in case a recession does hit the U.S. economy.