As businesses begin to reopen across the country, consumers are eager to return to their pre-pandemic lives and daily activities — though for some, that’s easier said than done.
The 2021 Planning & Progress Study from financial services company Northwestern Mutual found that, over a year since the start of the COVID-19 outbreak, many Americans are still struggling with their finances.
But for most, these setbacks seem temporary: More than half of respondents (58%) are in "financial recovery mode" — and among that group, an 89% majority expect to make a full financial comeback.
Consumers seek financial recovery after COVID-19 pandemic
A closer look at Northwestern Mutual's numbers shows that many respondents are making at least some progress in improving their financial situations. Specifically:
- 34% say they're in "late-stage recovery" — they have suffered losses but are mostly, if not fully, recovered to pre-pandemic levels and feel confident in their ability to achieve long-term financial security.
- 47% say they're in "mid-stage recovery" — they’ve suffered losses and are beginning to make up ground, but have not yet reached pre-pandemic levels; at the same time, they remain optimistic about their ability to achieve long-term financial security.
- 18% say they're in "early-stage recovery" — they’ve suffered losses and continue to be in decline, without clarity as to how they'll achieve long-term financial security.
The push toward financial recovery also shows up in gains for personal and retirement savings accounts.
For instance, the report showed that personal savings, on average, have increased by more than 10% to $73,100 in March, up from $65,900 last year. Likewise, the average amount of retirement savings has also seen a 13% boost to $98,800 today, compared with $87,500 a year earlier.
But even though 33% of respondents reported saving more over the past year, others are having trouble making progress on their financial goals. In fact, 31% are saving less — or not saving at all — while 9% have admitted to dipping into their savings during the pandemic.
Some struggle with planning for the long term
While post-pandemic recovery is a key focus, respondents also cited the need to protect themselves from future economic downturns. According to the survey, the most common defenses were having an emergency fund or personal savings (30%) and an overall financial plan (27%).
Previous findings from Northwestern Mutual reveal that the majority of Americans (83%) have been prompted to create, revisit or adjust their financial plans during the health crisis. This is similar to findings from a recent Logica survey, which found respondents making improvements on their emergency savings: A smaller percentage of respondents lacked enough savings to cover a month’s worth of expenses this spring than in the spring of 2020, while those who had savings could now cover more months.
Likewise, 74% said they are now able to make the distinction between what they can afford to spend now and what they should be saving for the future. And of the 33% who have saved more money during the pandemic, many have done so by:
- Reducing discretionary expenses (35%)
- Prioritizing saving over spending (23%)
- Increasing income (18%)
- Reducing living costs and necessary expenses (15%)
Still, the Northwestern Mutual survey also found that financial planning sometimes can only extend so far. Of the 58% of respondents who said they were in financial recovery mode, 24% are planning month-to-month, while only 14% have stretched their plans past the five-year mark.
In a similar vein, an earlier survey from Chase showed that just 76% of Americans said they feel confident in their ability to save for long-term finances and emergencies — and only 62% felt confident about saving for retirement.
Methodology: The Harris Poll conducted an online survey of 2,320 American adults ages 18 and up from March 16 to March 26, 2021 on behalf of Northwestern Mutual. Survey results were weighted to Census targets for age, gender, education, household income, region, race and ethnicity.