What the Past Year Has Taught Us About Spending Money

Bob Haegele   Wed, March 10, 2021

Spending habits are always changing in the US and elsewhere, but the past year has forced us to take a closer look at how we spend money. Many of those habits were already there, bubbling below the surface, but the pandemic has caused them to bubble over.

Read: Calculating Your Stimulus Check: How Much (if Any) Will You Get?

While millions have suffered due to COVID-19, either directly or indirectly, there are still many financial lessons to be learned from this historic event. To gain insight into the specific lessons learned, we took input from several financial experts.

We’re Spending Less on Nonessentials

When it comes to spending money, people are highly sensitive to economic uncertainty. That has led to a reduction in spending on nonessential items. According to Mike Kinane, head of US Bankcards at TD Bank, “COVID-19 has forced Americans to reprioritize or adjust their spending habits, with 58% reducing spend on nonessential items, 43% canceling travel plans and 36% delaying larger purchases.”

We’re Beefing Up Savings

Maintaining an emergency fund is always important, but the past year has made us acutely aware of the need to have a safety net. The result is that more people are padding their savings.

Personal Capital conducted a survey that confirmed this. “Those we surveyed are taking steps to shore up their finances, with many wanting 2021 to be a year focused on regaining financial stability,” says Craig Birk, chief investment officer at Personal Capital. “70% of respondents want to put more into savings, 33% are more likely to work with financial professionals vs. 24% at the initial onset of the pandemic.”

In addition, it’s important to prioritize savings during the worst of times. “Focus on savings instead of return rate,” says Ivan Watanabe, managing partner, Opus Private Client LLC at Guardian Life Insurance. “During times of crisis, your savings rate is more important than your rate of return. People who have saved money and continue to save money are in a better position to weather the storm.”

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https://finance.yahoo.com/news/past-taught-us-spending-money-160011710.html