SPRINGFIELD, Mass., March 25, 2021 – As the one-year anniversary of the COVID-19 pandemic reached the United States, surprisingly, nearly seven-in-ten (69%) Americans revealed that they are optimistic about their current financial outlook and nearly one-third (30%) are more optimistic compared to previous economic downturns according to the MassMutual Consumer Spending & Saving Index, released today. This is despite the vast majority (77%) agreeing that the health crisis caused the worst economic downtown in their lifetimes.
“While the pandemic continues to have major impacts on our lives, it’s encouraging that many are optimistic about their financial future as we prepare for better days ahead,” said Mike Fanning, head of MassMutual US. “For nearly 170 years, we have been here to help people prepare for difficult, unforeseen circumstances and take steps to help them secure their future and protect the ones they love.”
Saving in a pandemic economy
Saving has been difficult with almost half of survey respondents (49%) saying 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. Other key findings:
- More than half of Americans (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 Z/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%).
- Gen Z/Millennials’ primary reason for saving under $500 is job loss (33%) and one-quarter of Gen Z/Millennials are having trouble covering day-to-day expenses.
- 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 and/or home renovations.
Boomers taking a cue from past downturns
Despite having lived through other economic declines such as the dot-com burst and 2008 recession, a majority (72%) of Boomers agree this is the worst economic downturn they have seen. However, the Index found that Boomers, drawing from lessons of the past, were far more likely than younger generations to have adopted positive financial habits to prepare and say the financial advice they would impart on younger generations is to save as early as possible for retirement. Other key findings:
- Two-thirds of Boomers pay their bills on time (vs. only 52% Gen X and 49% Gen Z/Millennials).
- Half (50%) have eliminated spending on non-essential things (vs. 43% Gen X and 39% Gen Z/Millennials).
- 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.
The majority (68%) of respondents reported that they did not make any unanticipated big purchases and 37% reported spending less during the pandemic. As we look ahead to a “return to normal,” many plan to adjust savings and spending behaviors accordingly:
- Nearly one-third (31%) say they’re saving more now to prepare for increased spending in the spring and 29% are saving up to take a vacation.
- Millennials/Gen Z are preparing most for “life as usual” to resume, with 41% saving more for future spending and 30% saving for a vacation.
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,” added Fanning. “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.”