Over 8 in 10 Americans Shifted Financial Priorities Due to Pandemic, Focusing More on Debt and Emergency Funds
The COVID-19 pandemic has resulted in a lot of changes, ranging from the postponement of major life events to the way companies do business. A new survey from DepositAccounts reveals that consumers’ financial priorities are no exception.
In fact, our survey of over 1,000 Americans found that an overwhelming 82% of respondents said the coronavirus pandemic has caused them to change their financial priorities in some way. Perhaps the silver lining of the economic cloud brought on by the COVID-19 crisis is that more consumers are developing healthy financial habits during this time of turmoil.
- Of those surveyed, 82% said the coronavirus pandemic has changed their financial priorities in some way, including becoming more focused on paying down debt (36%) and building an emergency fund (33%).
- When asked what their number one financial priority is right now, consumers said paying off debt (25%), paying monthly bills (19%) and building an emergency fund (14%).
- The survey revealed that financial priorities vary by age group. Gen Z is most focused on finding a better job (31%), while millennials and Gen X are putting their energy toward paying off debt (25% and 28%, respectively).
- There were also differences in financial priorities between men and women. Men said their top financial priority is paying off debt (29% versus 22% of women), while women are primarily focused on paying their monthly bills (30% versus 8% of men).
- Nearly a third (32%) of consumers said they’re tracking their spending more often as a result of the coronavirus pandemic. Additionally, 28% are better at sticking to their budget and 24% are saving more money.
- About 45% of consumers are checking their bank account more frequently than they did prior to the pandemic, mainly to see if their relief check or unemployment benefits were deposited or to track their spending.
- Consumers have learned a number of money lessons from the crisis. The top three most important lessons consumers said they’ve learned are the necessity of having an emergency fund (28%), the importance of paying off debt during the good times (19%) and the fact that no industry or role is immune to layoffs (19%).
Consumers prioritizing paying down debt during the pandemic
The COVID-19 crisis has resulted in skyrocketing unemployment rates and a volatile stock market. The findings of our survey suggest that, as a result, consumers are being more proactive about their finances. Specifically, consumers are more focused on:
- Paying down debt (36%)
- Building an emergency fund (33%)
- Budgeting and understanding their spending (23%)
Notably, only 19% said the pandemic has not caused them to change their financial priorities.
“The focus should first be to establish at least a small emergency fund, with an amount of around $1,000. That can be used to pay for small emergencies, and that could prevent going further into debt,” said Ken Tumin, founder of DepositAccounts. “After that, the focus should be to pay off high-interest debt. Once progress on that is made, effort can go toward building the emergency fund along with paying off other debt.”
When we asked consumers how they’re ordering their financial priorities, the most popularly named top financial priority was paying down debt (25%), followed by paying monthly bills (19%) and building an emergency fund (14%). However, we did find differences across demographics in terms of top financial priorities.
When looking across generations, we found that the top priority for those in Gen Z is finding a better job (31%), while for millennials and Gen Xers it’s paying off debt (25% and 28%, respectively). Baby boomers and those in the silent generation are both focused on paying monthly bills (both 31%).
Meanwhile, we found notable differences in the priorities of men versus women. The top priority for men is paying down debt (29% compared to 22% of women), while for women, it is paying the monthly bills (30% compared to just 8% of men). This suggests that women have been hit harder financially by the coronavirus crisis, as they are focusing on simply making ends meet while men have the advantage of prioritizing less urgent financial needs.
One potential reason for consumers’ increased focus on basic financial priorities could be the economic impact payments that were distributed by the U.S. government earlier this year. While a previous MagnifyMoney survey found that the majority of consumers needed those relief checks to pay their bills, some may have used the windfall on other financial priorities, such as paying off debt and building an emergency fund. Additionally, many consumers are likely financially preparing for the future, as many experts predict this economic slump will last for years to come.
Americans developing healthy financial habits during COVID-19
While the coronavirus pandemic has put financial strain on many families, one bright spot is that, as a result, it has forced many consumers to adopt healthier financial habits. Our survey found that due to the COVID-19 crisis, people have developed healthy financial habits, including tracking their spending more, sticking to a budget and saving more money.
Additionally, 45% of people reported checking their bank account more frequently now than before the pandemic, with the most popular reasons for doing so being looking to see if their relief check or unemployment insurance was deposited (38%) and more closely tracking their spending (37%).
Overall, we found that only a slim percentage of consumers have actually developed negative financial habits as a result of the pandemic. Specifically, only 5% say they are spending more money, while 4% are paying with a credit card to make ends meet, 3% are taking out a personal loan and 3% are paying less on their debts.
They say that experience is the greatest teacher though, and the findings of our survey echo that sentiment, with only 8% of consumers saying they have not learned any financial lessons as a result of the pandemic. Instead, we found that the most popular money lesson consumers learned was the necessity of having an emergency fund, along with other lessons, such as the importance of paying off debt during the good times and that no industry or role is immune to layoffs.
DepositAccounts commissioned Qualtrics to conduct an online survey of 1,010 Americans, with the sample base proportioned to represent the overall population. We defined generations as the following ages in 2020:
- Gen Z as ages 18 to 23
- Millennials as ages 24 to 39
- Gen X as ages 40 to 54
- Baby boomers as ages 55 to 74
- Silent generation as ages 75 and older
The survey was fielded July 24-26, 2020.