One year into the COVID-19 pandemic, many Americans report that they are still struggling to save, but a solid majority say they are optimistic about their current financial future.
According to MassMutual’s Consumer Spending & Saving Index, nearly half of survey respondents (49%) say they have saved less than $500 in the past three months and 40% of those who saved less than $500 were directly impacted by job loss or a salary decrease.
The index tracks financial outlooks and behaviors in a changing economic environment, including attitudes in relation to the financial impacts of the pandemic.
Additionally, more than half of respondents (51%) had to dip into their savings over the last three months, and more than one-quarter (27%) had to withdraw $1,000 or more from savings accounts, including 21% of Boomers and 30% of Gen Zers and Millennials. Of those who dipped into savings, nearly one-third (32%) did so to help friends and family, the second most common reason after paying bills (55%), while more than a quarter used the funds to pay their mortgage/rent (28%), the findings show.
Nonetheless, about 7 in 10 (69%) respondents revealed that they are optimistic about their current financial outlook and nearly a third (30%) are more optimistic compared to previous economic downturns. This is despite a large majority (77%) agreeing that the health crisis caused the worst economic downtown in their lifetimes.
Among those who have been able to save, a rainy-day fund (46%) and retirement (39%) top the list of savings priorities. A quarter (24%) are also saving for a new home or home renovations.
Boomers Taking a Cue
Despite having lived through other economic declines such as the dotcom burst and 2008 recession, a majority (72%) of Boomers agree this is the worst economic downturn they have seen. MassMutual’s poll also found, however, that Boomers—drawing from lessons of the past—were more likely than younger generations to have adopted positive financial habits to prepare.
More than a quarter (27%) have built a larger emergency fund in case of severe downturns and nearly half (46%) are currently saving for an emergency fund.
When asked what financial advice they would convey to younger generations, saving as early as possible for retirement was the top response (76%). Boomers also recommended:
- avoiding credit card debt by paying off bills monthly (72%);
- creating an emergency fund (68%);
- being disciplined about paying off loans/debts (64%); and
- contributing the max amount to their 401(k) (51%).
“No one has ever regretted being too prepared or having saved too much for when times got tough or for when an opportunity surfaced, which has proven out this past year,” notes Mike Fanning, head of MassMutual US. “Building a financial cushion for emergencies and the future, and constantly assessing your financial plans and preparedness against changing circumstances, are key to both navigating current challenges and building financial security for a lifetime,” he emphasizes.
The poll was conducted online from Feb. 19 to March 1, 2021, by PSB Insights using a nationally representative sample of 1,000 Americans and an oversample of 500 American Boomers.
