Skip to main content
Home » Funding Your Future » Economic Impact of the COVID-19 Pandemic Affecting Financial Well-Being of Many Americans
Funding Your Future

Economic Impact of the COVID-19 Pandemic Affecting Financial Well-Being of Many Americans

Pandemic-Personal Finance-economic impact-stress-depression
Pandemic-Personal Finance-economic impact-stress-depression

In addition to physical health and mental health, the financial health of many Americans has been affected by the ongoing COVID-19 Pandemic.

Billy J Hensley-NEFE

Billy J. Hensley, Ph.D.

President and CEO, National Endowment for Financial Education (NEFE)

Americans continue to adapt and alter their ways of life to cope with the challenges of the pandemic. For financial reasons, the level of concern can be unsettling. Many are leaving their jobs, losing jobs, or enduring underemployment. The lack of housing affordability is stressing some household budgets. Inflation is at a near 40-year high and market volatility threatens investment security. The last two years have been a lot to bear. Managing financial anxiety remains an ongoing struggle.

Feeling pressure

More than 8 in 10 (85 percent) Americans confirm some part of their personal finances is causing them stress. This comes from a mid-2021 poll from the National Endowment for Financial Education® (NEFE®) on financial well-being. More than half (56 percent) of U.S. adults say not having enough saved in emergency savings, for retirement or for their child’s education is their biggest worry, and almost half (44 percent) say their ability to pay health care, rent/mortgage, or utility bills is causing the most financial stress. Considering this data, finding a family member, friend, or neighbor who isn’t financially affected by the pandemic becomes nearly impossible. Even in the best of circumstances, few budgets can withstand the significant financial strain that endures this long.

Early in the pandemic, Americans at all income levels were similarly pessimistic about their financial futures. While this pessimism had improved somewhat by mid-2021, more than a quarter (29 percent) of Americans still said they were “extremely/very concerned” about their financial situation. This sentiment was felt by 27 percent of white/non-Hispanic Americans, and regretfully by 35 percent for Black/non-Hispanic Americans and 31 percent for Hispanic Americans. Almost two-thirds (61 percent) of Americans said they were “somewhat/very/extremely” concerned about their finances.

Even when we’re not under the ravages of a pandemic, far too many people live on the edge of financial fragility — the inability to handle unexpected expenses. Each year, there consistently is a near 70 percent probability of economic disruption. Expenses like auto repairs, home maintenance, and medical bills often are among the main obstacles. But during the pandemic, many have been impaired by job loss and the inability to keep up with debt. More concerning is that most people are unprepared to manage setbacks when they occur. Research shows that 36 percent of working adults could not cover the cost of a budget shock of $2,000 within 30 days. And no group is immune. Financial fragility affects all ages, genders, and income and education levels. The data stress the need for all Americans to have emergency savings, but understandably that is easier said than done. Financial education is only part of the solution to the problem. It simply is not enough, considering not everyone has the same financial access and opportunity.

During COVID, people have listened to and reacted to potential risks to their physical health. Through vaccines, masks, and social distancing people have protected themselves as much as possible, but risks remain. Yet, the risks are calculated. We need the same mindset with our finances. Keeping debt reigned in, building and maintaining strong credit, having adequate emergency savings, and protecting employment offer cornerstone levels of stability. If you’re unable to pay your bills due to job loss, furlough, or other reasons, you might negotiate with your creditors to see what options are available to you. But first, review your budget for any spending cuts you might be able to make. For debts like auto loans, credit cards, or student loans, it may make sense to reach out to each lender to inquire about assistance programs they might have in place. Keep in mind that as the pandemic subsides, you will have to pay close attention to stay within the terms of any agreement you make with a creditor.

Coming together

During the pandemic, we’ve witnessed communities of financial professionals, educators, and advocates develop strategies to lend a guiding hand to those who need help now—and will continue to need help in the months and years to come. COVID has had devastating consequences on our physical health. Still, we cannot overlook the need to protect our financial well-being.

Next article