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Saving during the pandemic: Waiting out the storm?

Author

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  • Lydon, Reamonn

    (Central Bank of Ireland)

  • McIndoe-Calder, Tara

    (Central Bank of Ireland)

Abstract

Spending after the pandemic will be influenced by what households decide to do with their ‘excess pandemic savings’. Higher income households likely saved more. We estimate that more than half could be in the top 30 per cent of households by income. As these savings are more akin to deferred spending than precautionary savings, a relatively high share may be spent in future. If half of excess pandemic savings accumulated to date are spent, it could add up to 5 per cent (or €5 billion) to consumer spending over time. Savings could also be reinvested, including to purchase owner-occupied housing and fund home improvements. Spending could turn out to be considerably higher, if there is a swift recovery from the pandemic. Conversely, a slower recovery, with a weaker jobs and income outlook, could encourage households to hold on to more savings for longer.

Suggested Citation

  • Lydon, Reamonn & McIndoe-Calder, Tara, 2021. "Saving during the pandemic: Waiting out the storm?," Economic Letters 4/EL/21, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:4/el/21
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    File URL: https://www.centralbank.ie/docs/default-source/publications/economic-letters/vol-2021-no-4-saving-during-the-pandemic-waiting-out-the-storm-reamonn-lydon-and-tara-mcindoe-calder.pdf?sfvrsn=7
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    Cited by:

    1. Barrett, Michelle & Farrell, Niall & Roantree, Barra, 2022. "Energy poverty and deprivation in Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS144, June.
    2. Timmons, Shane & Robertson, Deirdre & Lunn, Pete, 2022. "Combining nudges and boosts to increase precautionary saving: A large-scale field experiment," Papers WP722, Economic and Social Research Institute (ESRI).
    3. Boyd, Laura & Keenan, Enda & McIndoe-Calder, Tara, 2023. "Earnings growth under high inflation," Quarterly Bulletin Articles, Central Bank of Ireland, pages 89-123, September.
    4. Ren, He & Zheng, Yi, 2023. "COVID-19 vaccination and household savings: An economic recovery channel," Finance Research Letters, Elsevier, vol. 54(C).

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