Counting Change: How Spending and Saving Habits Are Shifting 

The global pandemic has disrupted lives and businesses around the world. From saving and investing to deciding where and how you want to spend money, your world has likely changed, too.

Will it change for good? Will we go back to our previous spending and saving habits?

Previous Recession Spending Versus Today

Recessions can cause widespread ripples in the way we manage money. When the economic picture is uncertain, people are often hesitant to spend on nonessentials and may tighten their budgets in case their own employment or housing situation is threatened.

During the 2008-2009 recession, for example, many consumers switched from expensive or premium products to lower-cost options. Research from that time* indicated that people often chose to continue buying the cheaper product even after the recession ended. Businesses either adapted to the change in demand (resulting in a rebound or recovery)—or they didn’t.

Fast forward to today. We are at the start of a new recession. While people are understandably worried about spending during economic uncertainty, the reason for the recession—a global pandemic—adds additional complexity.

So far, consumer optimism is decreasing.** While many are adopting new ways of doing business—digital or low-contact options rather than face-to-face transactions—overall buying and consumption is down and still focused mainly on essentials.

Your Take

Over the past few weeks, we’ve asked our investors how their lives have changed. How do your answers compare?

Caution or Optimism: How Do You Feel About Spending Money Right Now?

With businesses at various stages of reopening, your options and plans for spending may be at a crossroads.

Source: American Century Investments email survey dated May 1, 2020: “How do you feel about spending during the pandemic?” 45% responded: “I’m not spending as much, but that may change when businesses reopen.” 27% responded: “Nothing has changed. I’m spending the same as always.” 21% responded: “I’m more cautious with my money due to the uncertainty.” 7% responded: “I’ve tightened my budget and am spending much less due to uncertainty or changes in employment/income.”

More or Less: Has Your Own Spending Changed?

Maybe you’ve changed the way you think about paying for goods and services and where you choose to do business.

Source: American Century Investments email survey dated June 5, 2020: “How have your spending patterns changed over the past few months?” 38% of respondents answered: "Not much of a change. I’m spending the same and generally using the same businesses as always." 47% answered: "I’m focusing on the essentials and my overall consumption is down." 12% answered: "I’m spending more to support specific businesses or groups (local, minority-owned, community-focused)." 3% answered: "I’m buying more now that I have the opportunity."

Looking Toward the Future: Are You Saving and Investing Differently?

Many households are managing money differently, for current expenses but also for future goals.

American Century Investments conducted an email survey on May 1st, 2020, asking, “Have you changed the way you’re saving or investing?” 76% responded, “Nothing has changed. I’m not doing anything differently with my savings and investment accounts.” 12% responded, “I’m adjusting my savings and investment routines because I’m worried about the market.” 6% responded, “I’m starting or contributing to an account to save more for potential emergencies.” 6% responded, “I’ve stopped adding to my investments.”

Worried About What’s to Come? We’re Here to Help

In an additional survey, two-thirds of respondents expressed concern that their future might be upended in a recession. From not being able to provide for others the way they’d planned, not retiring on time or making lifestyle changes, their worries reflect the overall economic picture.

Not sure of your next steps? We can help. Your financial future is important, and you can count on us to be there along the way.

 

* “How the recession has changed US consumer behavior.” McKinsey Quarterly. December 1, 2009.
** “Consumer sentiment is evolving as countries around the world begin to reopen." McKinsey Quarterly. June 5, 2020.

 

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