For many Americans, 2020 was a challenging year, as people of all creeds—families large and small; younger generations and seniors; essential and non-essential workers—adapted to changes brought forth by the COVID-19 pandemic and the resulting economic downturn.
In KeyBank’s 2021 Financial Resilience Survey, we polled more than 1,200 Americans between the ages of 18 to 70 to find out how they handled their personal finances over the past year. Without surprise, people found ways to be financially resilient. In fact, that resiliency is putting a majority of them in better financial position than before the pandemic. More than half (53%) of survey respondents reported they were more financially confident as they approached the end of 2020, compared to the beginning of the year.
Confidence, awareness and savings are up
With the economic woes of 2020 came lessons learned, highlighting Americans’ commitment to their financial fortitude, even during tough times.
While just 16% of people considered themselves to be a financial expert in 2020, 49% reported they are more financially aware as a result of challenges they might have faced during the pandemic. Some have lost jobs and income. Some have lost family members. Many have faced threats to their financial, physical and mental health. This reality led to a change in attitude about spending and savings. More than three-quarters of those surveyed say they are playing it safe when it comes to their finances, with a majority saying they are spending less on discretionary items.
Another positive trend is the growth of emergency savings. People are better prepared to handle a financial emergency at the start of 2021 than they were in 2020. More than half (51%) responded yes when asked, “Are you confident you could come up with $2,000 in the next month if an unexpected need arose?”
Impulse spending is down, optimism remains
As Americans adjusted their spending and savings to remain financially resilient during the pandemic, they made fewer financial “faux pas”—aka, money missteps—than the year prior.
Impulse spending ranked as the number one faux pas both in 2019 and 2020. The good news: 5% fewer survey respondents said they made impulse purchases during the course of the year. More good news is that few (11%) consumers put a clamp on spending. Instead, most consumers are cautiously optimistic about their finances. They are spending less and avoiding big ticket items, just in case, but they are still spending, which is great for the economy and vital for the survival of businesses struggling through the pandemic.
Boost your financial resilience
We also learned that those who feel most secure with their finances have common values about maintaining perspective and staying tough. Here are the top 3 factors those surveyed credit for helping them grow resilience.
- Sleep. Taking care of our bodies and minds has a strong correlation to our ability to weather the financial storm and make smart money decisions during the COVID-19 pandemic. Why? Focusing on what we can control —such as sleep, physical activity, and general mindfulness—helps establish the clarity and strength necessary for dealing with many of the circumstances we cannot control.
- Knowledge. Financial information can be sourced from many places: a financial advisor, family member, friend or the internet. Talking through financial decisions big or small can help you make smarter money moves. The point is: you don’t have to go it alone.
- Access. The pandemic has accelerated the adoption of digital banking, and consumers are more comfortable with virtual money management than ever before. People are leaning on budgeting apps, online banking and mobile deposits to help them navigate their financial futures and stay on track. Interestingly, those under 35, who are more likely to be experiencing financial firsts, tend to prefer a combination of digital and in-person banking, as compared to older people who are more likely to want to exclusively use digital tools for certain types of transactions.
Tackle challenges head on
Without doubt, some individuals and families are struggling through the pandemic more than others. Last year brought more adversity than most of us have experienced in decades. So if things are hard for you, you’re not alone. Talk with your banker. There are consumer and business relief programs available that can help you if you are experiencing financial hardship. All you need to do is ask. Your banker wants to help you.
About the author: Louis Hoxha serves as Regional Retail Leader responsible for the branch network throughout KeyBank’s Atlantic Region, which includes Westchester and Fairfield Counties. He can be reached at 845-620-4425 or Louis_Hoxha@keybank.com
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