While the pandemic has created financial challenges for many, some are finding a silver lining. More than 1 in 2 Americans — 53% — said they felt more confident in their ability to handle their finances at the end of 2020 than they did before the COVID-19 crisis began at the beginning of the year, according to new research from financial services company KeyBank.
In fact, it seems the challenges caused by the pandemic have inspired some consumers to take more aggressive steps to get their financial houses in order.
A financial wake-up call
The pandemic has not only caused a public health crisis, but it has created an economic one as well. Some businesses have shut down, leaving workers without jobs. In other cases, workers have seen their hours reduced. In fact, more than 2 in 3 hourly workers have had their work hours impacted, according to an earlier survey by payments company Branch.
Some consumers have responded to the financial uncertainty by saving more. The KeyBank survey found that 41% of respondents are spending less and saving more than they did before the pandemic. Of those who have stepped up their saving, 7 in 10 — 71% — said they have cut back spending on discretionary items, such as dining out, entertainment and travel. For example, a ValuePenguin survey found that 72% of Americans did not take a summer vacation in 2020.
For some, those savings are paying off, as 51% said they would be able to come up with $2,000 immediately in an emergency compared to 42% who could say the same in 2019. However, some are spending less because they simply don't have the money to spend. Among those who reported reduced spending, 14% said they have had to borrow money from family or friends during the pandemic.
Regardless of whether they are spending more or less, 48% of respondents said they felt they were more financially aware than they had been in the beginning of the year due to pandemic-related challenges.
The keys to financial resiliency
Not all consumers felt the need to cut back on spending in 2020. In fact, 42% said their spending habits did not change during the pandemic, underscoring a level of confidence and resilience in their finances.
Respondents were asked what factors made them feel the most financially resilient, and interestingly, the amount of money one has was not the top response. Rather, the No. 1 factor was getting a good night's sleep, cited by 38% of respondents. That was followed by:
- Having access to financial information, cited by 36%
- Using digital banking tools, cited by 35%
The survey also revealed somewhat of a generational divide when it comes to financial confidence. Among respondents aged 35 and under, 60% said they felt a greater sense of financial confidence at the end of 2020 than they had at the beginning of the year. In contrast, 51% of respondents 50 and over did not feel greater financial confidence.
Methodology: KeyBank commissioned polling firm Schmidt Market Research to survey 1,204 adults between the ages of 18 and 70. The survey was taken between Sept. 30 and Oct. 2, 2020. All respondents had sole or shared responsibility for making financial decisions for their households.