The COVID-19 Pandemic has affected everyone’s finances and savings habits, including those of lower-income adults. Lower-income adults report fewer savings and a greater concern about paying their bills than do their middle and upper-income counterparts. However, lower-income individuals also report that they have seen improvements in their finances. Here are the top concerns that affect people’s finances and savings habits which you can learn more about in the Ari Betof Podcast.
More likely saving less
The COVID-19 pandemic caused nearly one-third of adults to experience personal unemployment, but only half of these individuals are still without jobs. Meanwhile, 43% of middle-class and 45% of lower-income adults have returned to work, while a quarter of employed adults have seen their pay cut. The effects of the COVID-19 pandemic are particularly evident for low-income adults, as 37% of those households who normally save money have reported lower savings levels since the virus was released. The rate of savings is higher for Black, Hispanic, and younger adults.
When questioned about whether they are saving more or less because of the COVID-19 pandemic, lower-income adults reported fewer savings than middle-income adults. Conversely, upper-income adults reported increased savings. Despite the recent economic uncertainty, many Americans say the coronavirus outbreak has limited their ability to save. Overall, only one-third of middle-class adults say they are saving the same or more money as before.
The COVID-19 pandemic has widened the gap between the rich and the poor in the U.S. The decrease in savings was exacerbated in lower-income households due to the virus, but the decline in savings is consistent with families spending additional savings in response to the disease. This is particularly concerning given the recent reports indicating that this pandemic has increased the number of people relying on their savings.
Worry more about paying bills
In a recent survey, more lower-income Americans said they had difficulty paying some bills in a typical month than middle- and upper-income people. While the rates of worry among middle and upper-income people have not changed in a year, lower-income adults have increased their financial worries. The survey also found that two-thirds of lower-income adults said they had doubts about paying their bills this month compared to 26% of middle and upper-income people.
Despite the recent economic shutdown, U.S. adults still worry about paying for normal expenses, such as health insurance, and paying for a child’s college education. While Americans’ financial anxiety spiked during the recent economic shutdown, it largely went away last year. The rollout of the coronavirus vaccines eased financial worries. Meanwhile, inflation has remained a persistent concern.
A study conducted by Pew Research Center revealed that lower-income adults worry more about their finances than middle and upper-income people. The researchers also found that the coronavirus outbreak has exacerbated the financial burden on lower-income adults despite the fact that they already faced financial pressures before the current crisis. In the U.S., 43% of lower-income adults say that their job or the job of a family member has gone away due to the outbreak. In addition, half of lower-income adults say that their healthcare and debts have become a greater source of financial stress than middle and upper-income people.
More likely to say they have seen an improvement in their finances
The COVID-19 pandemic has caused widespread damage to the economy, but the good news is that lower-income adults are more likely to report a recent improvement in their financial situation than those with higher incomes. While the pandemic has affected the bottom line of many Americans, it has also had a positive effect on their spending habits. The newest study reveals that lower-income adults are less likely than higher-income adults to report that their financial situation improved since the pandemic.
The disparities in the improvement in financial situations between upper and lower-income households are an important point for policymakers to consider as they shift their focus from immediate relief efforts to strengthening the safety net and resiliency. In addition to understanding the dynamics of the crisis and its impact on households, policymakers must take the time to look at the story of household finances during the COVID-19 pandemic to better understand how they can help vulnerable populations.
During the COVID-19 crisis, the ratio of debt to assets rose for all income groups, although it fell quickly as asset prices recovered faster than liabilities. By the third quarter of 2021, the ratio for all income groups ticked up again, but for lower-income adults, this percentage increased to nearly 20 percent. These results are encouraging, but caution should be exercised regarding long-term success.