Household Cash Balances during COVID-19: A Distributional Perspective

Abstract

Months after the declaration of national emergency on March 13, 2020, the COVID-19 pandemic continues to impact the economy and household finances in dramatic and unprecedented ways. Household spending, which initially fell sharply during the shutdowns in March and April (Cox et al, 2020), has slowly recovered. The most financially vulnerable families have been impacted the most, with lower-income earners and Black and Latinx workers facing the highest job losses. The government responded with the massive CARES Act to bolster income and economic activity through stimulus checks, expanded unemployment benefits, and the Payroll Protection Program. Prior research has demonstrated the importance of liquid savings for maintaining financial resilience during times of uncertainty (Farrell et al, 2019; Farrell et al, 2020). What has been the net effect of these various forces on families’ liquid savings? Aggregate statistics suggest an increase in the deposits of households and nonprofits as well as commercial banks since March, 2020, but what does the picture look like for the median household and, in particular, low-income households?

We analyze trends in checking account balances between 2019 and October 2020 to understand how the pandemic and these government interventions have affected household financial outcomes across the income spectrum. As a highly liquid asset, checking accounts often serve as a family’s first line of defense to shield against financial shocks. It is also important to provide a distributional, household-centric view of account balance trends, which might be masked by aggregate public statistics on deposit levels. We address these questions via a unique data asset based on the daily balances of Chase personal checking accounts. The data asset follows the account balances of 1.8 million families across the U.S. who have been active checking account users since December 2018.