In a year like no other, some of us tapped our emergency funds while others found ways to grow their savings accounts. How did your 2020 measure up?
There’s no question about it. Times are still tough.
In December 2020, the overall unemployment rate in the United States was 6.7%, meaning about 10.7 million of us were out of work.
No matter how you slice it or dice it, 2020 did not go according to plan for many people. An OppLoans Blog survey on emergency preparedness and savings confirmed so, revealing that less than half of respondents regularly had enough money to cover bills and necessary expenses.
However, our survey — conducted in October 2020 through Pollfish — also revealed there were still a few bright spots among the struggles.
How did you measure up in comparison? Take a look at the numbers to find out.
Did 2020 force you to tap into your savings? Or were you able to grow it?
According to the 2020 survey, nearly 9-in-10 consumers said they had an active savings account they contribute to regularly. Another 5% who didn’t have a savings account still chose to save money in some other way.
Regardless of the amount of money consumers saved, about three-quarters of them said they were doing so regularly, with 40% saving once per month and 37% saving money more often than that.
Those significantly more likely to have a savings account included folks who were more likely to be:
- earning more money
- under 55 years old
- more educated
On the other end of the spectrum, one-in-three household decision-makers said they contributed 5% or less to savings.
Respondents who did not have a savings account at all typically said they couldn’t afford to put money into savings (45%) or didn’t think they had enough money to open one (29%). Other reasons for not contributing to savings included:
- Never got around to it (24%)
- Preferred to save in cash (15%)
- Too many fees (10%)
- Being turned away (4%)
- Unsure of how to open one (1%)
- Other (5%)
Whether folks were saving big or small, the important note is that 93% of survey respondents were saving something, even if minimal.
If you didn’t save money, here are some ways to start
As noted in our 2020 Smart Savings Guide (which includes money-saving tips and resources), saving as little as $20 per month can help to soften the blow of a financial emergency.
So even if your year was a hot mess, there are still likely ways to begin saving money (however little) now.
Here are some places to start.
Figure out where your money is going (and cut where you can)
It’s not just about making coffee at home. When you track a month’s worth of your spending patterns, you’ll be able to identify those unnecessary expenses and get rid of them — even if it’s just for now. Learn more about identifying extra money here.
Learn to budget
One-in-3 people don’t budget. Not budgeting makes it pretty difficult, or even impossible, to get ahead.
Budgeting can be intimidating until you get started. There are many approachable ways to start making a list of what you’ll need every pay period and then figuring out how to responsibly prioritize some wants too! Read about budgeting here.
Build your emergency savings
An emergency savings fund, however small, is a critical first step toward taking control of your financial life. There are psychological benefits, as well. (We’ll get into these more in a bit.) The piece of mind you’ll have from simply knowing that you’ve got $400 socked away will not only help you when an unexpected expense strikes; it will likely inspire you to save more.
Read more about working toward your financial goals here.
Pay yourself first
Sounds good right? It is. Paying yourself first means automatically moving a predetermined portion of your paycheck or income into your savings account. It’s responsible and gratifying. And with all the savings automation apps available now, it’s truly never been easier to get started. See what all the fuss is about here.
Identify what works best for your needs
We write a lot about saving money (like a lot). So we know there is no one-size-fits-all approach to saving money. Some people may prefer standard savings accounts that are accessible for short-term needs, while others may prefer longer-term investing — such as retirement savings plans — with higher interest rates or larger returns.
In the same vein, responses to our emergency preparedness survey showed that savings accounts were popular, but not the only savings methods that were helping consumers to grow their financial cushion. Some consumers were choosing to be strategic with their personal finance decisions, taking advantage of long-term accounts to reach their savings goals. Others (about 25%) were focused on stashing their extra cash at home instead of in a bank account.
Respondents reported using the following methods to save and grow their funds:
- Retirement savings plans (70%)
- Standard savings account with a banks/credit union (70%)
- Cash-based savings in the home (25%)
- Health savings account / FSA (20%)
- High-yield savings account (20%)
- Money market (19%)
- Certificates of deposit (16%)
- Savings app (15%)
- 529 fund/college savings account (12%)
- Other (10%)
- None of the above (8%)
While the economy has definitely impacted how much consumers were able to save in 2020, they were closely split between saving more money (36%), saving less money (29%), and saving about the same amount of money (34%) as they were before the COVID-era began. Those who were unemployed, female, or without a college degree were more likely to save less money.
If you dipped into savings in 2020, you’re not alone
You already know 2020 was tough. Whether you lost income, had to adjust your spending, racked up some credit card debt, or found your utility bills skyrocketing, you likely had an interesting financial year.
So did others.
After March 2020 and the onset of COVID-19, about half of consumers withdrew money from their savings account for a financial emergency. Most often — 52% of the time — the financial emergency involved a job loss or loss of income.
Other emergencies leading to the use of savings funds included:
- Medical emergencies (33%)
- Home repairs (30%)
- Natural disasters (16%)
- Other (11%)
On average, after the onset of COVID-19 in 2020, folks withdrew 19% of their savings for financial emergencies. However, approximately the same proportions of consumers withdrew money during this time period to cover regular living expenses, such as rent or mortgage payments, utility and phone bills, and car payments. On average, they withdrew 16% of their savings.
We found that 39% of respondents withdrew money from their savings for both emergencies and regular expenses.
Folks were significantly more likely to have withdrawn from savings to cover regular expenses if they had a lower income or kids at home.
Family size made a difference — as anyone who does the grocery shopping likely knows. Our survey results showed that 8% of those with 3 or more children withdrew more than 50% of their savings as of the onset of COVID-19.
When you save more, you feel better
Our survey respondents rated their confidence with their current savings situation as a 5.7 on a 10-point scale. Those with higher incomes were significantly more confident in their savings than those with middle or lower incomes.
More than 45% of respondents had a confidence rating of 5-out-of-10 or lower. These respondents were more likely to be unemployed, at least 25 years old, white, and female.
Those who rated their confidence as 5 or lower often said they did not have any or enough savings, especially if they were to find themselves in an emergency situation. Areas of concern impacting confidence levels around savings plans included:
- Job/income loss or low / no income
- Too many bills/debt
- Concerns about the COVID-19 pandemic
- Uncertain times/economy
- Health/family issues
- Job insecurity
- No budget or not sticking to a budget
With that being said, if faced with a total household income loss today, respondents, on average, said they could get by on their savings for 18 weeks. However, “average” is the keyword to note here. About one-third of lower-income respondents and one-quarter of middle-income respondents said they wouldn’t even be able to get by for more than three weeks, if at all; about 20% of both middle- and lower-income households said they could get by on savings for 4-6 weeks.
Holiday spending and saving
2020 had a lot of surprises in store for us. With all of the unexpected circumstances surrounding the year, maybe we can take some comfort in knowing that the annual arrival of the holidays remained the same and consumers still planned in advance for them — even if the plan was to spend less (48%).
In 2019, 51% of consumers saved in advance for the holiday season. That’s not too far off from what consumers reported in our October emergency preparedness survey. At the time, 46% said they had already started saving for the holidays, while 9% of those who hadn’t still had plans to try.
On average, consumers planned to spend $730 on the holidays in 2020, but 3-in-10 planned to spend $250 or less. About 3-in-4 consumers say they planned to pay for holiday expenses with cash/money from their checking account, but shoppers also planned on using credit cards (41%), money from their savings accounts (27%), or even personal loans (4%).
Goodbye, 2020. No one will miss you.
You know what this year was like. And chances are you want to forget this rollercoaster ride as quickly as possible.
Rising unemployment, falling interest rates, and emergency government assistance resulted in budget shifts for families across the country. For some, student loan payments were put on hold, reinstated, and put on hold again; for homeowners, low-interest rates allowed for refinancing opportunities; and for others, job loss may have thrown a wrench into a household’s overall financial well-being.
While the volatility and uncertainty continue, there are plenty of reasons to be optimistic. And it’s definitely easier to be optimistic if you’ve got a little savings built up. It’s not possible for everyone right now, but if you think you can begin to set aside a little money, our Savings Guide can help with expert suggestions and action plans.
So no matter how you fared financially in 2020, congratulations for gutting through a year no one will forget anytime soon no matter how much we may want to do so.
Survey results and methodology
The results presented in this report are based on an online survey conducted among 800 U.S. household financial decision-makers. The survey was commissioned through OppLoans and deployed through Pollfish in October 2020. Respondents ranged in age from 18 to 64 years old. Each of the four census regions (Northeast, Midwest, South, and West) were equally represented. The survey margin of error is +/-3% for questions answered by the entire sample. Questions with a smaller base will have a higher margin of error. If presented, statistical significance testing is at the 95% confidence level.
Lane Kareska is a digital marketing director at OppLoans. His areas of focus include personal finance, consumer credit access, and the prime and subprime lending industry.
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