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The COVID-19 crisis has brought widespread change to the financial landscape. What lessons are we learning from these changes, and how are we applying them to our lives?

Here are three money lessons on saving and spending that consumers are learning, as well as actions they are taking with this knowledge. The lessons are shared by KeyBank executives Kimberly A. Kleve, VP, Head of Deposit Portfolio Management – Consumer Segment; and Tommi M. Wooten, Senior Vice President and Portfolio Growth Group Manager, Consumer Payments.

This article is one in a series, “Money Lessons from the Pandemic,” focusing on learnings people are taking away in three financial areas: homeownership, managing debt and saving and spending.

Money Lesson 1: Spend Less, Spend Safely

Consumers spent less, especially in April and May, when much of the country was under quarantine, Kleve noted. Wooten said the initial decline in spending due to the pandemic was 30%.

“We expect spending to pick back up to pre-COVID-19 levels, but we don’t expect people to spend above them,” Kleve said.

Spending has been on a steady incline since April, according to Wooten. But what we’re buying has shifted. “Consumers began shifting spending from travel/restaurant categories to grocery/warehouse/home improvement and also increased spend in grocery and food delivery categories during restaurant closures,” she said.

In addition, she said, when they do spend, consumers are placing a premium on safe and clean transactions as a result of COVID-19. “Consumers are using their Key Cashback® credit card with ‘tap and go’ feature to earn cash for everything they purchase instead of taking cash out of the bank.”

Applying the lesson:

  • Don’t make up for lost spending. Kleve shared this example from KeyBank’s partners at Novantas: “Clients may have missed three to four haircuts in the last few months but are not likely to make them up. We expect they will likely return to their previous cadence.”

  • Emphasize cleanliness. Citing the Mastercard Economics Institute, Wooten noted a 46% increase in consumers changing out their primary credit card for a “contactless” or “tap and go” card.

Money Lesson 2: Save More and Pay Down Debt

With less spending, checking balances remain elevated since the pandemic started, according to Kleve. And savings balances continue to remain much higher year-over-year as clients are saving more than ever before.

Kleve offered a caveat, however: “Our concerns are whether or not the extended unemployment benefits that expired at the end of July will put pressure on clients. We are unsure how these additional benefits have truly impacted clients’ spending behavior, ability to pay debt and meet other obligations. Will we see more spending outflows, debt deferrals or debt defaults once these benefits expire?”

Applying the lesson:

  • Drive debt down. As much of the population received stimulus checks or unemployment, consumers used the money to reduce debts, Wooten said. A Mastercard Economics Institute survey, she pointed out, showed that nearly half of those who received a stimulus check stated that they would use it to pay bills.

  • Put it in savings. The same survey found that 27% of respondents would use the money for savings. “People are moving their money to cash as we weather out the storm and uncertainty,” Kleve said.

“The pandemic gave everyone an extreme, eye-opening view of something they never imagined, no matter what their personal financial situation is.” – Tommi Wooten, KeyBank

Money Lesson 3: Prepare for the Unexpected

“People have learned that they need to be prepared for the unexpected,” Wooten said. “The pandemic gave everyone an extreme, eye-opening view of something they never imagined, no matter what their personal financial situation is – whether ensuring their credit is sound, having to secure credit cards for emergencies, or having a manageable amount of debt with enough savings to make payments if there is a job loss or interruption.”

With this preparation comes added caution, Kleve said. “People are likely to be more cautious with their spending and more concerned with building their emergency savings to better prepare for an event like this in the future.”

The preparation also includes closely examining our personal financial situations. “Ultimately,” Wooten said, “the pandemic made each individual assess their current savings and spending.”

Applying the lesson:

  • Ensure your credit is sound. “Whether it’s credit or savings, people are learning they need quick access to emergency funds,” Wooten said. “We have seen an increase in our Key Secured Credit Card® applications, indicating clients are very interested in improving their credit. The card enables clients with less-than-perfect credit or unestablished credit to build their credit and work toward more purchasing power.”

  • Review your financial wellness. “Even though our branch lobbies were closed to the general public,” Wooten said, “many clients made appointments to come in and speak to bankers about their financial wellness.”

“People are likely to be more cautious with their spending and more concerned with building their emergency savings to better prepare for an event like this in the future.” – Kimberly Kleve, KeyBank

Recommendations from the Experts

Kimberly Kleve and Tommi Wooten offered these takeaways on saving and spending in the time of COVID-19.

  1. Pay down debt and save, save, save.

    “The old lesson of having 3-6 months of emergency savings holds true,” Kleve said. “The saying ‘pay yourself first’ is truly important. Every dollar counts. Also, ensure you are taking advantage of 401(k) employee matches.”

    Wooten concurred: “Save while you still can. Many people are not back to pre-COVID-19 behaviors just yet because certain restrictions still exist. Consumers should take the money they are saving from not having to pay parking, drive to work, etc., and stash it away in savings.”

  2. Take advantage of the benefits for which you qualify.

    “Many financial institutions offer added discounts and bonuses for having a full relationship. Consumers can put the extra cash into an emergency savings fund for the future,” Wooten advised.

    Meet with your banker to take advantage of everything your institution has to offer, Kleve added.

  3. Upgrade your debit and credit cards.

    “Ensure that you have safety, security and capability,” Wooten said. “Consumers should consider what is needed during a shutdown or when they do not have access to their bank lobbies. For safety, with a contactless card, you can tap to purchase in retail stores without handing the card to an employee. Consumers can also add recurring payments or add their card to many merchants’ online websites to make purchases vs. going in the store. Also, look for cards that offer fraud alerts to feel confident when making online purchases.”

  4. Act now.

    “Most importantly,” Wooten emphasized, “consumers should not wait until there is an emergency, because most often they will not be able to obtain credit quick enough or make changes easily to obtain the services or products that they need. Emergency plans need to be made now.”

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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