Survey: Almost Half of Americans Feel They are Making Financial Progress, but Anxiety Remains
Tuesday, February 16th, 2021
The economic turbulence caused by the COVID-19 pandemic has resulted in two very different financial experiences among Americans, according to findings from the inaugural BMO Real Financial Progress Index, a new quarterly measurement of consumer sentiment about money conducted by Ipsos. Despite seeing the largest economic decline since WWII in 2020, almost half of Americans (46%) believe they are making financial progress. Yet there is still a significant percentage (11%) who say they are not making progress, with another 43% in the middle.
Despite the different realities of how Americans are faring financially, they share some commonalities. The majority of Americans (57%) are feeling financial anxiety as a result of the pandemic, and there are barriers that are hindering their ability to take steps toward their financial goals or make more progress. Even with this feeling of anxiety, there is hope – 77% of Americans are optimistic about their personal finances as they look at 2021.
"There is a clear dichotomy in how Americans have been impacted financially through the pandemic, and it echoes the conversations we've had with our customers," said Paul Dilda, head of consumer strategy for BMO Harris Bank. "While the pandemic has constrained behaviors like overspending and resulted in better financial habits for some, others are struggling to do more than make ends meet. Given Americans' financial optimism for 2021, we hope this research encourages more dialogue about what it means to get ahead and how to carry forward any positive habits formed during the pandemic."
Financial Progress - Two Different Realities:
Financial progress is defined as the ability to take steps to achieve the financial goals or measures that are important to Americans, and the survey found that two very different realities exist around making financial progress. According to the 46% of Americans who believe they're making financial progress:
82% have enough savings to get them through an unexpected emergency
43% say that the COVID-19 pandemic has improved their financial situation
For those not making progress (11%), the effects of the COVID-19 pandemic have negatively impacted their financial situation and exacerbated the challenges they face when it comes to making progress. They are more likely to be female (63% vs. 36% male) and:
Only 31% have enough savings to get them through an unexpected emergency
61% say that the COVID-19 pandemic has worsened their financial situation
40% say they're falling behind on basic needs
When further comparing the two groups side by side, the contrast between the two realities comes sharply into focus considering the actions Americans take, or don't take, to make progress.
Those not making financial progress are less likely (30%) to say they are saving money on a monthly basis compared to 78% of those who are making progress.
Those not making progress are less likely (21%) to set a yearly budget compared to 52% of those who are making progress
Those not making progress are less likely (46%) to set financial goals for themselves compared to 83% of those who are making progress
Those not making progress are less likely (13%) to have an advisor compared to 41% of those who are making progress
Those not making progress are less likely (12%) to have a written financial plan compared to 44% of those who are making progress
The Knowing-Doing Gap:
When looking at Americans holistically, there is a gap between knowing what to do to improve their finances and taking the steps to do those things.
Eight in 10 Americans say they know what to do to improve their financial situation and actively take steps to do so (82%, 81%, respectively). Yet only 40% save money from every paycheck, and less than 30% ask their bank for financial advice at least once per year. Moreover, half of Americans (41%) admit they often do things to worsen their financial situation, and 51% often spend more money than they know they should.
"For those that feel they are making financial progress, this is the time to double-down on the habits that have moved the needle, and understand how to manage gains effectively so they can carry them forward post-pandemic in ways that help grow their money," Dilda said. "For those that need assistance, it's time to reexamine their finances through the 2021 lens. It's the perfect time to set goals, talk with people they trust and take advantage of the programs and educational resources that banks offer. All of these tactics can help them better understand their current financial situation and make progress toward what they want to achieve."
Sources of Financial Anxiety:
Whether Americans feel they are making progress or not, the COVID-19 pandemic remains a key source of financial anxiety overall, with 57% of those surveyed saying that the pandemic causes them at least some anxiety. Other sources of financial anxiety include:
- the fear of unknown expenses that may come up (49%),
- a person's overall financial situation (42%),
- housing costs (36%),
- family-related expenses (35%),
- keeping up with monthly bills (34%),
- medical expenses (34%),
- credit card debt (29%),
- and student debt (21%), rising to 47% among those under the age of 24.