Americans’ personal savings have fallen off a cliff. Brace yourself for just how much they have declined.

In fact, the personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — fell to 3.5% in August, according to the Bureau of Economic Analysis. It’s quite a U-turn: The personal saving rate recently peaked at 26.3% in March 2021 and 33.8% in April 2020. But the drop in the personal saving rate isn’t all pandemic-related: In January 2020, before the coronavirus pandemic, it was 9.1%.

The pandemic has left people in a vulnerable state.

“I believe many people’s spending habits went into deep freeze, even when folks were stuck at home and the only person they might see on a daily basis was the Amazon delivery person,” Janet Lee Krochman, a certified public accountant in Costa Mesa, Calif., told MarketWatch. And now? “I think the gloves are off and folks are playing catch-up.”

After the worst days of the pandemic, Americans splurged. “People want to experience life again, and create happy memories to help replace the not-so-nice ones that they have from the pandemic years,” Krochman said. Credit-card debt rose to $887 billion in the second quarter of 2022, according to the Federal Reserve Bank of New York. That’s up 13% on the year — the largest annual increase in 20 years.

The pandemic has left people in a vulnerable state. On the one hand, stimulus checks led to a record decline in the number of American households without a bank account last year. The number of unbanked households fell to 5.9 million last year from 7.1 million in 2019. On the other hand, ​​Americans’ ability to pay bills on time fell for the first time in five years, according to one recent report.

How to boost your savings

So what now? Krochman recommends automatic drafts from checking accounts into high-interest savings accounts, “if you can’t have it removed from your paycheck into some type of an employer-based plan.” Keeping money “out of sight” also keeps it “out of mind” and helps prevent impulsive spending, she adds. The limit for 401(k) contributions will jump nearly 10% in 2023. A good 401(k) plan comes with a company match, plus low-cost investment options and low fees.

Others agree with this approach. “Transfer money every paycheck to a separate savings account,” said Ted Rossman, a senior industry analyst at Bankrate.com. “Some of these yields are over 3% now. For example, UFB Direct and Dollar Savings Direct,” he said. “Those are the highest savings rates we’ve seen in years. You’re less likely to miss what you don’t see. Pay yourself first.” (A recent Bankrate survey found that just 27% of people have six months’ worth of expenses saved.)

Another tactic: Look for a higher-paying job, ask for a raise or take on a side hustle, Rossman said. “Sell stuff you don’t need. Drop little-used subscriptions. Cutting a recurring monthly expense has 12 times the impact of doing the same thing just once. Negotiate lower prices. I recently called my cable/internet/phone company and satellite-radio provider and scored substantial savings just by asking for a break. That represents hundreds of dollars in annual savings.”

Automate your savings and cut down on spending.

Economists say it’s not all doom and gloom: There are opportunities to boost savings. With 3.5% unemployment in September, the labor market is strong. What’s more, the U.S. added 263,000 jobs in September, although that was the smallest gain in 17 months. And while the rise in average hourly earnings over the past year slowed to 5% in September from 5.2% in August, it’s still one of the fastest increases since the early 1980s.

By most economists’ predictions, a recession is not expected to arrive until next year. Americans who are struggling to pay for rent, utilities and groceries have time to boost their savings, experts say. Among their pieces of advice: Prioritize paying off high-interest debt; keep track of spending, whether you use credit or debit cards or cash; and look to a nonprofit organization like the National Foundation for Credit Counseling over for-profit debt-settlement companies.

Consider buying generic brands, cut down on eating out and shop at cheaper supermarkets. “Take advantage of ‘buy nothing’ groups and thrift shops,” Rossman added. “Repurpose what you already have. Do it yourself if you can, or swap skills and tools with a friend or neighbor. Repair instead of replacing. Get another year out of that car or cellphone or appliance. Every little bit counts.”