Pandemic Fuels Changes to Consumer Financial Habits

Pandemic Fuels Changes to Consumer Financial Habits

Americans are working more hours, spending less on credit cards and saving for emergencies more
Piggy bank savings

The coronavirus pandemic has inspired many changes in Americans’ lives — particularly in the ways they earn, save and spend money. At the onset of the pandemic, many faced unforeseen challenges when incomes shrank or disappeared altogether. Now, new data from marketing research firm Logica shows that many consumers are getting back on track.

Employees working more hours and changing retirement plans

In 2020, workers across numerous industries saw their work schedules cut or eliminated. Logica’s study found just 13% of people in the spring of 2020 reported working more hours than normal. Now, as many states reopen and the U.S. inches closer to the end of the pandemic, that percentage has nearly tripled, with 36% of working people putting in more hours on the job.

Despite those longer work days, the share of folks shifting retirement plans earlier remains small, but has grown. Up from 3% in spring 2020, now 9% of working people plan to retire earlier. However, delaying retirement has also become a little more popular, with 1 in 3 workers saying they’ll postpone their golden years versus 1 in 4 who said the same last spring.

Consumers using credit cards less, contactless payments still lagging

The beginning of the pandemic made many consumers wary about germs on physical surfaces, with some businesses even banning cash payments in an effort to curb germ transmission. This helped kick off a rise in the use of different methods of contactless payment.

Perhaps as a result, consumer preference for using apps to make in-person payments rose slightly in the summer and fall of 2020, but has since gone back down. Debit cards have remained the favorite throughout the crisis, with 35% of consumers still preferring to pay this way in the spring of 2021.

And while credit cards beat cash for consumer preference, their popularity has fallen slightly in recent seasons, maybe due to more cardholders paying off their balances. Still, 28% of shoppers prefer to use plastic, compared to 30% last spring. Just 23% of consumers prefer cold hard cash to make purchases, down from 25% in spring 2020.

When it comes to virtual payments, folks are using peer-to-peer (P2P) options more than at the beginning of the pandemic, with 32% reporting they now use P2P more often. Millennials and Gen Xers increased their use of P2P the most, with each at least doubling their share of consumers saying they use P2P more often compared to last spring (23% to 46% for millennials, and 17% to 34% for Gen Xers).

Buy Now, Pay Later (BNPL) plans have also seen a sizable increase in use. Last spring, just 9% of respondents said they use BNPL more often, compared to 19% who say the same now. Millennials and Gen Xers have flocked to BNPL options similarly to the way they’ve adopted P2P: Just 12% of millennials and 9% of Gen Xers claimed to be using BNPL more frequently in spring 2020, compared to 27% and 24%, respectively, who are now using installment payment options more.

Financial stress decreases, emergency savings increase

It shouldn’t come as a surprise that more than 2 in 3 consumers reported being somewhat or very stressed about their financial situations last spring — even those maintaining their incomes may have suddenly felt this way as an unprecedented crisis unfolded. That number has decreased a bit, with 56% reporting that they still feel stressed in spring 2021.

And although many remain stressed about money, consumers appear to be preparing better for the next emergency. Just 11% of respondents say they don’t have enough savings to cover a month of expenses, down from 20% in spring 2020. Those with savings reported they could cover a median five months of expenses with their stashes, while it was only three months last spring.

In addition, more consumers are looking to grow their savings by investing. Sixteen percent say they’re putting more money into the stock market, up from 10% in spring 2020. Plus, more folks may be getting professional advice for those investments, with 15% working with a financial advisor or planner more often, compared to just 9% a year ago.

As the pandemic continues to recede, hopefully consumers will take the lessons learned over this time and continue improving financial habits.

Methodology: The Logica Research Future of Money Study is an online study conducted among a representative sample of 1,000 general population U.S. adults and an augment of 200 older Gen Zers (ages 16 to 24). The study was conducted April 8 to April 14, 2021.