Many Americans were not financially prepared for the economic disruptions caused by the coronavirus this year. For example, a Bankrate poll conducted just ahead of the pandemic found that 40 percent of U.S. adults doubted that they would be able to make it through a recession unscathed, including 16 percent who said they were not prepared at all for a job loss or other financial hardship common during such a downturn.
Even Americans who would typically be considered more financially stable appeared to be lacking preparedness for a sudden money-related shock. A similar report from Wells Fargo and Gallup, for instance, found that only 55 percent of surveyed investors with at least $10,000 in stocks, bonds, or mutual fund holdings could describe themselves as “very well prepared” to deal with an unexpected $5,000 expense. Around 8 in 10 investors (83 percent) felt very well prepared to cope with an unforeseen $1,000 outlay, but just a third of respondents could report the same level of confidence about a sudden $10,000 setback.
Although there was clearly a lot of room for improvement with respect to Americans’ rainy day funds leading up to this crisis, the nature of the economic fallout from the lockdowns and other measures to stem the spread of COVID-19 was much more severe than most people could have even imagined (and reasonably prepared for). The government, though, fortunately stepped in to make sure this unprecedented hit to the economy was met with unprecedented support via the CARES Act and other relief efforts. As a result many households have at the very least been able to weather this recession much better than they otherwise would have.
A newer Bankrate survey, for instance, found that more than seven in ten Americans reported being able to have made progress on their top financial priorities this year, which for most respondents meant “staying current on bills,” and “setting more money aside.” The latter is particularly encouraging because it supports other recent research we have seen that suggests many Americans fortunate enough to still have a disposable income have been mainly using it to shore up their emergency fund. This will not only leave such households more prepared for another economic shock but also in a better position to resume growing their retirement nest egg as we exit the recession.
Sources: Bankrate, Wells Fargo, Gallup