The pandemic has caused a lot of people to alter how they manage their finances, but as for exactly how, you’re likely to get very different answers depending on who you ask.
- One-third of respondents to a Northwestern Mutual survey said they were able to save more over the last year, but almost as many said they are saving less or have stopped saving altogether.
- 58% of those surveyed said they feel like they are in financial recovery mode due to the pandemic.
- Almost half the respondents in a separate survey, by brokerage firm Charles Schwab, said they are now more likely to save.
For example, U.S. adults are almost equally apt to have either ramped up or slowed down their saving during the pandemic, according to the results of an online survey released Wednesday by Northwestern Mutual. Of those participating in the March survey, 33% said they have been able to save more over the last year, 31% said they are saving less or have stopped saving altogether, and 9% reported digging into their savings account and shrinking their nest egg.
Northwestern Mutual's study found that most of us (58%) feel like we’re in financial recovery mode due to the pandemic, but what that recovery has looked like varies widely. The overall personal saving rate has surged during the pandemic, thanks partly to three rounds of government stimulus checks, causing people in the U.S. to build up more than $1 trillion in savings above what’s typical. But those numbers obscure the fact that many face a harsher reality. It’s the trademark of a K-shaped recovery, with some people bouncing back from a recession sooner and faster than others.
"The divide runs deep between those who will emerge from this extraordinary time with better habits and more savings, and those who have struggled greatly and have much more ground to make up," said Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual, in a statement.
The people who said they’ve saved more in the last year credit steps like reducing discretionary expenses, prioritizing saving over spending, increasing their income, or even cutting back on living costs and expenses.
Average Savings Rise
On average, the personal savings of those surveyed by Northwestern Mutual has increased 10.9%, up to $73,100 this March from $65,900 a year earlier, and average retirement savings has jumped by 12.9%, $98,800 from $87,500 in the same period.
Brokerage firm Charles Schwab, in an online survey conducted in early April of 1,100 people with 401(k) accounts, found that many also had taken financial lessons from the pandemic. Nearly half (48%) said they are now more likely to save, with 36% more likely to contribute more to their retirement account, 35% likelier to invest more outside of their 401(k), and 34% more apt to pay off debt.
That all syncs with the lessons learned by those surveyed by Northwestern Mutual, who said they thought having an emergency fund and a financial plan were the best defenses against a future economic downturn.
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