2020 marked a year of uncertainty amid the coronavirus pandemic, political upheaval and a presidential election. Despite these challenges, many Americans have shown resilience when it comes to managing their finances, a new survey from financial services firm Edward Jones found.
The vast majority (81%) of Americans feel in control of their financial situation, and nearly half (46%) of respondents are confident in their ability to quickly recover from a difficult financial situation, according to the survey.
In an effort to maintain financial stability, consumers are rethinking their money management strategies. For example, some have postponed major life events, such as buying a home or changing careers, in favor of safer financial investments.
Americans find ways to reduce financial risk amid pandemic
Achieving and maintaining financial stability amid such a chaotic year hasn’t come without its sacrifices. Many Americans have had to amend their short-term financial strategies, postponing significant financial events, including:
Survey respondents instead have prioritized less risky financial commitments, like saving for higher education and bolstering their emergency funds. While Americans are cautiously optimistic with the rollout of the COVID-19 vaccine, they’re still playing it safe by growing their savings.
Consumers making their safety net a priority
More than half (53%) of Americans are actively contributing to their emergency funds, the survey found. It’s important to have an emergency fund of at least three to six months’ worth of expenses, even in stable times, so it’s no surprise that Americans are playing it safe while they’re still dealing with the pandemic.
If faced with a financial hardship, here’s where respondents would access immediate funds:
- Emergency fund: 23%
- Cash reserves: 20%
- Loans from family or friends: 12%
Unsurprisingly, more Gen Zers (31%) would tap family or friends for money than any other age group. According to the Pew Research Center, the oldest members of Generation Z were born in 1996, making these Americans 25 and younger in 2021.
Looking ahead, consumers prioritize financial literacy
When it comes to money management, it’s good to prepare for the worst and hope for the best. But even the most pessimistic among us may not have been financially prepared for what 2020 had in store. Some Americans may have had to dip into their college savings or retirement funds just to keep a roof over their heads and food on their plates.
"It's encouraging to see that Americans feel confident in their financial standing given the tumultuous year 2020 presented," said Edward Jones Principal Vanessa Okwuraiwe. "Even so, financial stability requires careful planning, goal-setting and the flexibility to revise that strategy if and when situations arise."
Perhaps that’s why many consumers — particularly younger consumers — have made financial literacy a priority. Nearly a third of millennials (31%) have prioritized increasing their financial knowledge, which is significantly higher than any other age group, and more than double that of baby boomers (14%).
Methodology: Financial services company Edward Jones commissioned a Morning Consult survey among a national sample of 2,200 adults from Dec. 8-9, 2020.