Post-Pandemic Personal Finance Trends

Ever since March 2020, the world has changed in a multitude of ways. Economically speaking, there have been challenges such as significant supply chain disruptions as well as widespread unemployment and a decreased motivation of Americans to seek employment as a result. But what has not been talked about as much are the changes to personal finance trends as a result of the circumstances of the pandemic. Some of the most important changes to Americans’ personal finance planning include increased awareness of budgeting, a reduced amount of spending, and an increase in financial liquidity.

            The majority of Americans knew that because of the impacts that the pandemic had on the domestic economy considering topics such as lockdowns, restrictions, and unemployment, they would need to become more aware of personal financial planning for themselves and for their family. In fact, “84% of Americans surveyed in a 2020 Planning and Progress Study believed that the pandemic will impact their ability to achieve long-term financial security in some way, and nearly 60% believe the impact will be moderate or high” (DeLucas, 2021). As a result of the challenges that the pandemic posed financially, “many individuals were forced to go back to the drawing board and readjust their budget to fit within their means. A positive effect of this hardship, however, was an increase in financial discipline” (DeLucas, 2021). It is encouraging to consider the increased eagerness to become financially educated and stable for many Americans.

            In considering the budget of Americans during the pandemic, many significantly reduced spending, increased liquidity, and gained motivation to pay off more debts than before the pandemic. The circumstances sparked a “flight to liquidity, as consumers moved funds to keep more cash on hand. Even economic stimulus—intended to spark spending—inspired many households to save and pay off debt” (Wright, 2021). It seems smart that Americans adapted to the uncertain circumstances to ensure more financial stability with increased cash on hand, a smart approach for many Americans considering the time. The increase in liquidity also increased the urge to have a more stable and larger emergency fund for Americans. “Prior to the pandemic, 71% said they had a sufficient emergency fund. Now, 42% say they need to replenish their emergency fund, with 44% saying they need to increase the size of it” (Tymkiw, 2021).

Furthermore, “federal unemployment programs put an additional $583 billion in unemployed workers’ pockets. While recipients spent the majority of their economic payments, data revealed that many households used their stimulus to alleviate economic hardship or reduce future risk” (Wright, 2021). This relates to increased personal savings as a result of the pandemic to prevent future hardship, shown by the fact that “In March 2021, the personal savings rate—which reflects the ratio of total personal saving minus disposable income—surged to 26.6% […] Pre-pandemic levels that were below 10%” (Tymkiw, 2021). Additionally, “Equifax and the Federal Reserve Bank of New York found that consumers paid down an unprecedented $118 billion in credit card debt in the first half of 2020” (Wright, 2021). This demonstrates that a greater awareness of budgeting by the increase in both savings and the financial motivation to consider the benefits of not waiting to pay off debt has collectively been beneficial for Americans.

            Despite the challenges, Americans have a more optimistic outlook than one might expect for future financial trends as the United States slowly gets back to normal life, eliciting more swift economic recovery back to pre-pandemic levels. The same survey suggested that “76% believe they will achieve long-term financial security in less than 5 years and 79% are confident that the country will return to economic growth” (DeLucas, 2021).

            Ultimately, the increased motivation of Americans to achieve financial stability during both uncertain and difficult life and economic circumstances during the pandemic is without a doubt encouraging. Something to consider is if the push to become financially educated and stable will continue to this degree once the United States economy gets fully back to pre-pandemic levels and the pandemic itself is essentially over. Predictions can be made, but only time will tell.

Edited by Jackson Pentz

Works Cited

​​DeLucas, C. (2021, July 22). Post-Pandemic Personal Finance Trends. Yeske Buie. https://yebu.com/financial-planning/post-pandemic-personal-finance-trends

Tymkiw, C. (2021, September 28). How COVID-19 Changed Our Saving and Spending Habits. Investopedia. https://www.investopedia.com/how-covid-19-changed-our-saving-and-spending-habits-5184327

Wright, I. (2021, April 20). Pandemic Effects on U.S. Consumer Finances and Attitudes. Equifax. https://www.equifax.com/business/blog/-/insight/article/pandemic-effects-on-u-s-consumer-finances-and-attitudes//