Financial Habits During and After the Pandemic
More than one third of Americans have experienced a drop in income of 25 percent or more, according to a J.D. Power Financial Services survey conducted in June. As a result, 22 percent of Americans reported that they were unable to make the minimum payment on a credit card in the past month.
Consumer spending, saving, and borrowing behavior has changed in response to the pandemic, and experts say the financial uncertainty will have a long-term impact on how Americans manage their personal finances. “I think it’s going to lead to a generation that is less interested in taking risk, and they won’t mind if they’re leaving opportunity on the table because they’re just more and more interested in their downside protection than they were before,” Morgan Housel, author of “The Psychology of Money,” told CNBC.
Americans Are Spending Differently
As Americans avoid public places due to coronavirus dangers, they have ceased spending at most businesses, while certain companies, from food delivery apps to Amazon and Walmart, have benefited from the change.
According to a New York Times analysis of credit and debit card data, grocery stores experienced a spike in demand in mid-March, bringing in 79 percent more in sales when compared to the previous year. Online grocery delivery services and meal kit providers have done especially well. Restaurant delivery apps have fared well during the crisis as well, but restaurants themselves have suffered, especially fine dining establishments.
Americans are still spending on entertainment, but they’re choosing different activities: E-books, music streaming, video streaming, and news media have all seen increases in sales, and sales for gaming are especially high. As people prepared to hunker down, Nintendo Switch consoles started flying off the shelves. But spending on other forms of entertainment has decreased significantly, with movie theaters, theme parks, and concert halls being hit the hardest.
The retail industry is also hurting. Brick-and-mortar stores have seen revenues drop the most, but online shopping is also down. As Americans struggle with tighter budgets and focus on saving amid financial uncertainty, it’s likely that apparel and footwear are areas where many are attempting to trim their budgets. People have also cancelled their gym memberships and stopped spending on beauty services. And, unsurprisingly, spending on transportation and travel has plummeted.
While many Americans have been able to stash more away in a savings account, others have relied on credit cards to get by during periods of decreased earnings. One survey found that the financial challenges of coronavirus directly increased credit card balances for 28 million Americans.
The Bottom Line
The pandemic has already changed the way Americans are spending, saving, and borrowing, and the psychological effects of these uncertain times will likely have a lasting impact on consumer behavior. The full impact of the pandemic on Americans’ personal finances has yet to be realized.