U.S. Banks Flush with 2 Trillion Dollars in Cash

This surge of money into banks has no precedent in history.

Why Cash Levels Soared

Several factors have contributed to the cash surge, including $600 billion in government-sponsored loans to small businesses, direct checks to individuals, and expanded unemployment benefits. Additionally, Americans have had fewer options for spending their money while on lockdown.

How Long Will the Cash Stay?

So, how long will the $2 trillion remain in bank accounts? That question remains uncertain and sparks much debate.

We do know that individuals use banks to keep their money safe from loss or theft, make payments efficiently, and maintain accurate records of financial transactions.²  However, most people don’t expect their bank accounts to generate significant interest income. In fact, the average savings account currently yields only 0.1%.^3,4

To make matters more frustrating, banks aren’t expected to raise interest rates anytime soon. Simply put, they don’t need additional deposits.⁵

To make matters more frustrating, banks aren’t expected to raise interest rates anytime soon. Simply put, they don’t need additional deposits. For investors looking at alternatives, reviewing bond investments or retirement portfolios can help put cash to work more effectively.

Revisit Your Accounts

Banks play a key role in personal finances. Still, it’s wise to review your accounts periodically to ensure they align with your goals. If you have questions about the role of certain accounts, please give us a call. We’d be happy to discuss strategies that fit your unique situation.

^{2. Federal Reserve Bank of Atlanta, 2020}

^{3. BankRate.com, May 5, 2020}

^{4. The Federal Deposit Insurance Corporation (FDIC) insures bank accounts and certificates of deposit up to $250,000 per depositor, per institution, in principal and interest.}

^{5. CNBC.com, June 21, 2020}

Important Information

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