Financial goals shifted for Americans after COVID-19

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Signs of optimism, confidence emerge in ACCC Q1 2021 ‘Financial Health Index

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Consumers have been forced to change their savings goals from things such as buying a home or saving for a car to staying ahead of necessary expenses or rebuilding a depleted emergency fund.

The pandemic of 2020 forced many Americans to shift their financial goals into survival mode, according to a new poll by American Consumer Credit Counseling (ACCC). But there are new signs of optimism about employment and household finances as the nationwide effort to deliver the COVID-19 vaccine reaches critical mass.

The ACCC Financial Health Index for the First Quarter of 2021 found that a year into the pandemic, 60 percent of respondents’ financial goals have changed, with 24 percent of respondents saying that a key financial goal now is to simply keep up with monthly expenses. That’s a marked difference from what many reported was their priority before the pandemic. More than a quarter of respondents (27 percent) said they had been saving for a large purchase when the coronavirus disrupted life around the world.

“The pandemic was a financial shock and also, for many, a financial wake-up call. A lot of households were forced to re-assess their budgets and financial goals,” said Allen Amadin, President and CEO of American Consumer Credit Counseling. “Consumers have been forced to change their savings goals from things such as buying a home or saving for a car to staying ahead of necessary expenses or rebuilding a depleted emergency fund.”

Replenishing emergency savings has become a critical goal for 18 percent of those polled, according to the Financial Health Index. Another 14 percent said finding a new job is their top financial priority. The Q1 2021 Financial Health Index is based on a March survey of 410 Americans, aged 25-65, with household incomes of $100,000 or less.

Thirty-seven percent of respondents from the Q1 2021 Financial Health Index say their employment was very stable, an increase from 30 percent in the Q4 survey. Looking back to the beginning of the pandemic, the Q1 2020 Financial Health Index found that only 27 percent of respondents felt their employment was very stable. Last month new unemployment applications fell below 700,000 for the first time since March 2020, according to the U.S. Department of Labor. California, Ohio and Illinois were among the states that had the biggest decrease in new jobless claims.

“For the first time in a year, we are seeing some real signs of improved confidence among the populations that we service,” said Katie Ross, Executive Vice President of ACCC. “More people feel they have employment stability. More people are comfortable with their household income, and more people feel they can reduce their total debt by at least 10 percent in just a few months.”

In the Q4 survey conducted in December 2020, only 24 percent of respondents were very confident that they could reduce their debt by 10 percent in the next six months. This confidence increased to 31 percent in the 2021 Q1 survey.

According to the Organization for Economic Cooperation and Development, the U.S. Economy is expected to grow by almost 7 percent in 2021 and 4 percent in 2022. It is also expected the U.S. labor market will see fewer long-term effects from the pandemic than were seen after the 2008 financial crisis.

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Marissa Sullivan
O'Neill and Associates
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