Contributed by Chalice Network
The past three months have provided behavioral economists and psychologists with the perfect setting to evaluate consumer spending habits under extreme constraints. Denied of the opportunity to divulge in their most common spending habits, Americans were presented with a chance to think long and hard about the various priorities in their lives. In April alone the country experienced an unheard of 33% savings rate. This figure is expected to remain in double digits for the rest of the year, according to professional chief strategists. In fact, many economists believe the savings percentage will continue at an elevated rate for several years to come.
The country is slowly coming out of lockdown with a newfound appreciation for time and money. Those two commodities, after all, tend to be people’s most valuable assets. Currently, financial advisors are counseling uneasy clients, many of whom have seen their lives shaken in the past few months. Other clients are making room for major changes in their lifestyles and using this experience as one of deliberation. The months of March and April, in particular, Americans endured long days where they could revisit the balance between their preferred and actual lifestyles. They were given an opportunity to reflect on where they want to live, work, invest, and spend time with moving forward. For many, this was a rare opportunity to really lay their cards on the table and decide if they liked the hand they were playing.
As daunting as the Covid-19 crisis has been, it has shown Americans how much money they could save on a regular basis. For many, eliminating morning stops for coffee, fast food lunches, happy hours and other extravagances has helped keep money in the bank. Of course, different clients will face Different clients are forced to deal with contrasting concerns during the pandemic. Corporate executives are suddenly wondering if their comfortable retirement plan is now in danger. Conversely, small business owners are worrying about whether or not they’ll survive this ordeal and be able to pay their employees.
Warranted or not, the government-directed shutdown of many small businesses that were sustainable in the pre-pandemic world may never reopen. In fact, we could be witnessing the most enormous transfer of wealth in history from Mom and Pop shops to much wealthier companies. Unfortunately, numerous advisors are documenting helping clients liquidate their firms and oftentimes, refer them to bankruptcy attorneys.
Age will play a factor in consumer spending moving forward. Those over 60 years old are expected to be much more cautious about spending cash until there’s a vaccine or cure for the virus. Younger generations will likely be more willing to return to business as usual once the virus is better contained. However, this pandemic will serve as a cautionary tale for those of all ages who are experiencing it. The year 2020 will forever remind the masses of the importance of saving for a rainy day.
