It would be an understatement to say that COVID-19 has changed spending and saving habits — it has completely transformed the way we finance our lives.
First, there was panic buying, with toilet rolls, hand sanitizer, pasta and flour at the top of the shopping list. Then, when people realized the pandemic wasn’t going to disappear quickly and supplies of essentials were available, we became a nation of online shoppers and home delivery businesses boomed.
More than a year on from the early cases of COVID-19, lockdowns and other restrictions are starting to ease, stores are reopening in many states and there’s a major stimulation package in place to help America’s recovery. The big question is, will our spending and saving habits return to pre-pandemic patterns or will the ‘new normal’ continue to resemble the past year?
But before any speculation, let’s look back at the way life changed.
Life without a job
One of the biggest factors driving change was employment. Lockdowns and other restrictions pushed unemployment levels to record highs in many industries. Okay, there was unemployment benefit and other schemes to soften the blow. But, for many people, the reality was a big drop in income.
Unsurprisingly, the biggest change was spending less or nothing on non-essential products and services. The biggest spending cuts were on:
- Purchases from malls and larger stores
- Dining out
- Child care
- Visits to bars and clubs
- Attending sports events and concerts
- Hair and beauty care
- Gym membership
Some of those changes were enforced by closures and lockdowns, but average monthly spend fell, even when the facilities were open.
For anyone without a job, that meant more time spent at home. And, with children at home during school closures, that pushed up family food bills and the costs of heating and lighting.
There was pressure too on mortgage and rent payments. Although schemes were in place to protect tenants and householders though payment holidays, the threat of eviction was never far away. As early as April 2020, around 1 in 10 Americans felt they could not meet their rent if the pandemic continued.
In those circumstances, the only option for unemployed people who had already cut their expenditure was to raid any savings they had.
Living and working at home
For people who retained their jobs, the spending and saving patterns changed in a similar way, driven by uncertainty about the future.
During the main periods of lockdown, many people found themselves adjusting to working from home. While that reduced work-related travel expense, it also pushed up the costs of being at home.
Some of the additional expenditure went on computers and broadband services to stay in contact with the office – and keep the kids in homeschooling – while people with more free time on their hands spent more on various forms of home entertainment and exercise.
These were some of the major increases in household spend:
- In-home activities
- Video games
- Take-out food
- Home gym equipment
- Streaming subscriptions
- Digital movie and TV downloads
A boom in online shopping and digital coupons for savings
Perhaps the biggest change in spending habits has been the rise and rise of online shopping. The US Census Bureau reported that consumers spent $211.5 billion dollars online in the second quarter of 2020 — up more than 31 percent on the same quarter in 2019.
Closely allied to the boom in online shopping was a rise in the use of digital coupons. Inmar Intelligence reported that redemption in March 2020 had increased by more than 56 percent year on year as consumers looked for more ways to reduce their budgets. Stores also signed up quickly for coupon programs with a 93 percent increase in take-up after March.
Like other elements of the pandemic, this is partly due to the closure of stores during lockdown, but it’s also fuelled by the realization that, by searching, people could find greater choice and more bargains online than they could in their local store.
Both manufacturers and retailers have adapted to this shift with many stores offering home delivery as well as collect-only services during lockdown. Manufacturers saw big shifts in their sales patterns. Nestle, for example, saw an increase of 49 percent in online sales in the first six months of 2020. Reckitt Benckiser, makers of hygiene products saw a 60 percent rise in online sales during the same period.
Changes in the housing market
Although there has been a general shift away from buying big ticket items, the housing market has seen a growth in demand for larger properties in out of town areas. This is driven by the rise in the number of people working from home.
Many need more space for the home office and others feel it’s okay to move out of town because they no longer need to worry about the daily commute.
Spending and saving in the ‘new normal’
As lockdown eases and the economy returns to growth, will those COVID-19 habits remain? Experts and consumers are divided – will pent-up demand lead to a surge in spending or will people remain cautious while new variants of COVID remain a threat?
With restaurants, bars and sports venues reopening, even with reduced capacity, people now have the opportunity to switch their spending patterns. And, those stores that survived are hoping customers will break their online habits and return.