Study Shows Shift from Banks to MMFs
The Associated Press writes that "More Americans shift money from checking and savings to accounts with investment income, study says." The article says, "New research finds that more Americans are shifting their money from checking and savings accounts into financial vehicles that pay an investment income -- a trend that helps to explain the resilience of the U.S. economy after a bout of high inflation and recent uncertainty due to tariffs. The analysis by JPMorganChase Institute examined the accounts of 4.7 million households and found that people's total cash reserves are increasing when including new amounts going into brokerage accounts, money market funds and certificates of deposit.... Inflation-adjusted cash balances in checking and savings accounts 'remain low with a flat-growth trajectory,' but since the middle of 2024 total cash reserves have been increasing and approaching historical growth trends once the additional accounts are included, the analysis said." The update quotes Chris Wheat, president of the institute, "Families across many income bands are now seeing a turnaround in their total cash." It adds, "Wheat said it had been 'hard to square the circle' of consumer spending staying strong despite the lack of growth in checking and savings accounts, an issue that can now be explained by people in a higher-interest rate environment shifting more money into accounts that yield investment returns. He said people appear to be using the other accounts to manage their cash, rather than simply making long-term investments." JPMorganChase's update, "Household Finances Pulse through May 2025: Bank balances are flat but total savings are growing again," states, "We find that while inflation-adjusted balances in checking and savings accounts remain low with a flat growth trajectory, total cash reserves have likely been rising since mid-2024 and are approaching historical growth trends."
