By Urjit Patel
The year 2020 has been an active experiment in consumer confidence. Even with new cases of COVID-19 on the rise in the United States and across the world, it seems the holidays will still be merry for some retailers. While it may be hard to predict how Americans will adapt their spending and saving habits in 2021, one thing is clear right now: They overwhelmingly took advantage of Cyber Monday deals, setting a record for the largest Internet shopping day in the U.S.!
However, if you compare this year’s spending data to the same period in 2019 you find consumers have:
- Saved more. When the world seems unpredictable, saving money is a reasonable response – it creates a buffer against sudden job loss, reduced income or unexpected expenses. According to com, in the early days of the pandemic, Americans buckled down and started saving more money than ever before. Approximately one-third of all disposable income was set aside in case of an emergency.
- Invested less. As late as August, a Gallup poll indicated that 76% of Americans who saved money deposited it in a savings or checking account. The motivation for that may be to keep savings liquid and easily accessible, rather than stowed in a retirement account, stocks or bonds, real estate or other assets. Look for a high-yield savings account and think of it as investing in yourself. The interest earned, even on a small deposit balance, can quickly grow into a comfortable safety net.
- Borrowed more. Consumer credit is up more than 3%, according to a report on Florida spending. Typically, that’s an indication of higher consumer confidence – but this year, it may have been triggered by job loss or hardship which put families behind on bills.
- Tracked the news closely. Consumer confidence typically takes cues from the headlines. This year, customers tended to base their purchasing decisions around the rise and decline of COVID-19 cases, and how quickly a treatment plan could be implemented. Political shifts also tend to influence how investors and shoppers feel about the economy.
- Shopped at a distance. As shoppers avoid store aisles and spend more time at home, COVID-19 has accelerated growth in e-commerce and delivery, especially for Amazon. The e-commerce giant reports 2020’s holiday shopping sales figures surpass any prior year. With enticing deals still being offered, online shopping is expected to continue to outpace in-store purchases.
While the future is unknown, we should always be prepared, as unexpected emergencies are bound to happen. The gift-giving and festivities of the holidays bring a lot of pressure to overspend, which can make it harder to stick to a budget. Now is a good time to consider reassessing monetary assets, household budget and long-term savings goals. Not only will this help reduce the extra costs December tends to bring, pausing to review personal capital also builds stronger financial habits as we ring in a new year.
Urjit Patel is Executive Vice President of Consumer Banking at Axiom Bank, N.A.