Sparking A Culture Of Saving: A Lesson From Covid-19

Millions of people are currently experiencing financial hardship in one way or another, as a result of the pandemic and the economic recession our country is experiencing.

State-mandated business closures, unemployment, lowered incomes, and benefits running out are just a few of the economic strains hitting people hard. As with many difficult circumstances, there are lessons we can learn to make for a better future. For many Americans, the lesson is to build a stronger culture of ‘saving’ that could change the way we allocate and manage budgets to achieve financial stability far after the pandemic subsides.

According to a recent MarketWatch report, nearly 25 percent of Americans have no emergency savings. Sixteen percent have taken on more debt, and nearly one-third of households reported lower income since the start of the pandemic, a report by Bankrate.com concluded.

While consumers and individuals are suffering, the commercial sector and especially small businesses are suffering as well. A recent survey by the U.S. Chamber of Commerce found that only 53 percent of businesses note to be in ‘good health’ and only 56 percent report comfort in their cash flows.

No one could have predicted the COVID pandemic and the current economic climate we are currently experiencing, leading to our government acting swiftly and quickly to provide the programs and relief to support businesses and consumers. With the support of Congress, the Fed deployed stimulus packages and relief in multiple phases to help both businesses and consumers. It dramatically increased the size of the balance sheet and decreased interest rates, all measures created to ease the pain of economic slowdowns. We expect to see an increase in deposits, which several banks have reported during earnings, and an increase in cash showing up in businesses and consumer pockets.

While the government has taken the steps necessary to advance liquidity in the marketplace and provide the necessary support to our economy, what lessons are being learned here? It would not be prudent to be reliant on the government to bail out every sector of the economy in every time of distress. In fact, there will be some price to pay for that. It is important that consumers and business owners alike rethink their financial plans and reevaluate their spending needs and habits. Banks can provide loans and extend credit in good times, but what happens if you are unable to borrow, or the bank is unable to lend? We are optimistic and confident that the economy will eventually bounce back, but it is crucial that consumers and business owners change the way they think about money, cash flow, and savings in particular.

It is evident now more than ever, that people place a priority on building up and saving funds when the sun is shining in order to mitigate the risk of relying solely on government services to help navigate future unpredictable financial crises. Banks and especially community banks can help play a role, but it is incumbent that we take more responsibility for their financial well-being.

By Frank Sorrentino, Contributor