What happened to all the money that lower-income households saved up during the pandemic? The answer, surprisingly, may be that much of it still hasn’t been spent.  There’s no doubt that U.S. households overall saved up record amounts of cash in the aftermath of COVID-19’s arrival, when stimulus checks and other forms of government relief flowed and opportunities to spend were diminished. 

What happened to all that cash, though, is something of a puzzle, and potentially one with a surprising answer: lower-income households may have held on to much of the extra money, an analysis by Moody’s Analytics released Wednesday suggested. 

If that finding holds true, it means that people with lower incomes have weathered the recent spike in the cost of living better and may be in a better financial position than most people assume.

Economist Scott Hoyt conducted the analysis using data on assets and debts from the Federal Reserve and its survey of consumer finances He also used data on income and spending from the Bureau of Economic Analysis. Hoyt said he was as incredulous as anyone at what his model showed.

“My first thought was, this is loony,” Hoyt said. “And then my second thought was, well, okay, let's go back and look at things. They really did get a lot of extra income. They seem to have been the winners in the job market … maybe this isn't as implausible as I thought it was at first.”

Overall savings peaked in the third quarter of 2021, when households had about $2.4 trillion stashed away beyond what they had at the end of 2019, according to the Moody’s analysis. Of that, those in the bottom 10% by income held about $128.1 billion.  By the third quarter of 2022, overall stockpile had dwindled to about $1.7 trillion, while the bottom 10%’s share had grown to $132.4 billion—still a miniscule amount compared to higher income groups, but surprisingly resilient.

Conventional wisdom would suggest that lower-income households have been hit the hardest by spikes in the cost of things like housing, gas and groceries since 2021, especially since they proportionally spend more of their income on those necessities. 

Previous analyses have found that overall, U.S. households have spent down much of their pandemic-era cash stockpile to keep up with inflation. And as Hoyt noted, the government doesn’t collect data on excess savings differentiating between groups, so estimating it involves using a lot of assumptions that may or may not be true. 

“We just don't have the detailed household level data to probably ever resolve question,” Hoyt said. 

However, there are reasons to believe Hoyt’s model may show a real trend. The topsy-turvy pandemic era job market has helped out the lowest-paid workers quite a bit: Between 2019 and 2022, wages for the bottom 10% of workers grew 9% after adjusting for inflation, an analysis by the Economic Policy Institute, a progressive think tank, found. 

Employers in typically low-paid fields like food service have had to boost wages in order to attract workers amid a labor shortage. The bottom 70% of households claimed a larger than usual share of income gains between 2020 and 2021, at the expense of higher-income households, according to data from the Bureau of Economic Analysis cited by Hoyt.

Lower out-of-pocket healthcare costs may have also helped: a pandemic-era expansion of Medicaid rolls, for instance, extended health insurance to millions, helping many household bottom lines.