Financial Lessons Learned During the COVID-19 Pandemic
A new study from Capital One found that the COVID-19 pandemic has changed people's perceptions of managing their money
If you’ve taken a step back to review your finances during the COVID-19 pandemic, you’re not alone.
A new study conducted by Capital One revealed that nearly 60 percent of respondents have completely changed how they think about money during the COVID-19 pandemic and that their perception of financial well-being has shifted.
At Capital One, financial well-being means empowering people to save time and money for the things that truly matter. While encouraging a better financial path through access to credit, tools to manage debt and product features that take the stress out of money, we are here to support a journey that enhances mental, physical and financial health. There’s no one-size-fits-all approach to achieve financial well-being, but luckily there are plenty of resources, products and tools available to help people improve their financial lives.
To help consumers continuously navigate unique challenges, we're committed to helping individuals adapt to the evolving impacts of financial well-being on physical and mental health throughout the COVID-19 pandemic.
Dissecting the Data
During the COVID-19 pandemic, nearly half of respondents reported an increase in the amount of money they say they need in their rainy day fund.
In fact, respondents added one month of emergency expenses to their savings — an average of five months pre-pandemic to six months now.
We know that stress dominates the financial mindspace of many Americans, with 77 percent of people reporting that they feel anxious about their financial situation and 58 percent reporting that finances control their lives. Under the effects of stress, people struggle to save and budget, feel less in control and are more impulsive in how they spend their paycheck.
Even during a stressful time, 20 percent of respondents picked up new financial habits or began working toward new goals as a result of the uncertainty of the COVID-19 pandemic.
The most popular goals include setting a budget, paying off credit card debt, starting an emergency fund, tracking credit scores more closely, starting to save for retirement and learning about investing.
Capital One’s 360 Checking and 360 Performance Savings accounts are simple and straightforward, with no fees and no minimums – perfect for starting an emergency fund. Whereas Capital One Cafes are intentionally designed to help people feel more confident about their relationship with money, with programs to help people plan out their goals in life and think through how their financial behaviors connect to those goals.
Money Habits Coming Out of the Pandemic
According to the study, nearly 30 percent of respondents said their top financial struggle is establishing good spending habits, so it’s no wonder the habit they want to change the most is spending on items they don’t really need.
Nearly 30 percent of people blamed pandemic-related stress for impulse spends.
Additionally, 40 percent of respondents said impulse spending is a habit they’re trying to shake. Similarly, roughly 40 percent people said they regretted the impulse purchases they made.
"After living through the last year and a half, one of the most important things we’ve learned is that there isn’t a ‘one-size-fits-all’ approach to well-being,” said Lia Dean, President of Retail Bank and Premium Card Products at Capital One. “People have always been stressed about money, perhaps never more so than right now, which is why we want to create a world where our customers can save more and live fully without losing sleep over their finances.
Outside of good spending habits, nearly 30 percent of respondents believe their credit score is the strongest indicator of their financial well-being, followed by the ability to pursue their financial goals without concern (19 percent).
Capital One offers digital tools like CreditWise to help people manage their credit, a key source of potential stress, and stay on top of spending without worrying all the time.
"We’re committed to creating a world where our customers can live fully without losing a wink of sleep over their finances,” Dean said.
Financial Tips Worth Saving
Financial decisions are some of the most complex and stressful decisions people face on a daily basis. In order to reach and help as many people as possible, Capital One is focused on providing tips that can work for everyone — regardless of income level, age, or where people are in their long-term goals. We strive to create a world where everyone has an equal opportunity to prosper.
Some of the financial habits we recommend people keep top-of-mind include:
- Keep your goals in front of you: Reminders can be as simple as making your goals the screensaver on your cell phone. This small but consistent reminder can ensure that your goals are always top of mind, especially when making financial decisions.
- Make important decisions under low stress: Next time you have to make a financial decision — like making a big purchase or booking a vacation — you could try to schedule the decision at a time when you feel relaxed and have the mental bandwidth to consider the long term impact of your decisions. You can’t choose to be less stressed right now, but you can choose to put off your decision until a moment when you’re less stressed.
- Focus on what you can control instead of what you can’t: While you cannot immediately change your financial situation, you can change the way you think about it to improve the decisions you make about your finances. The next time you are faced with a financial decision, try not to get caught up thinking about what you wish you had. Instead, try to focus on what is within your control and what you can change.
- Don’t punish yourself for the past — be kind to yourself when reviewing purchases: Stress can push us to make decisions based on whatever feels most satisfying at the moment. In some cases, these decisions can lead to regret, which can lead to further feelings of stress and create a vicious circle. Next time you are thinking about a past purchase you aren't happy with, acknowledge that it was a mistake and formulate a plan to avoid it next time.