As Americans enter into another week of business closures and expanded stay-at-home orders, the percentage of those who are impacted financially by COVID-19 and its economic fallout continues to rise. Everyone is affected, but those who have the least are being hit hardest and are uncertain about their plan for handling their financial situation.
Last week, our survey revealed that about 53% of American households were negatively impacted financially. In week two, we saw that rise to 59%. This is likely the result of increased unemployment — the percentage of people indicating they’d lost their job outright jumped from 9% to 16%. As job cuts mount and uncertainty remains, consumers are hoping that this is a temporary shock, not a fundamental shift in our economy.
Financial distress is becoming less discriminate as time passes — all generations and income levels report a financial impact, but Gen X and Baby Boomers are increasingly concerned. While the spike in jobless claims was primarily driven by Gen Z and Millennials, we saw a rise in Gen X and Boomers reporting a negative impact to their household income. Boomers who saw a drop in household income rose from 35% to 49% this week.
As income drops across the board, people are naturally struggling to keep up with their bills and loans. Consumers are turning to short-term solutions to keep up with their financial obligations: 36% are tapping into savings, and 21% indicated they’ll borrow from family and friends to stay afloat. Much of this is driven by Gen Z and Millennials.
Unfortunately, 22% of Americans don’t have a plan to meet their upcoming financial needs. This comes as the amount consumers estimate they’ll be short on paying their bills has grown from $903 to $1,031 since last week. The coming relief package will provide some support for these short-term liabilities, but when this relief will arrive remains to be seen. Households with the lowest income, who may not have robust savings to tap into, tend to have shorter time horizons before being low on funds.
We’re currently finding the most vulnerable consumers are those who don’t know where they stand with their credit. Of people who don’t know their credit score, 41% are unsure of how they are going to fulfill their approaching bills. Of that group, 80% have not talked to their lenders about potentially past-due payments.
This represents an opportunity for businesses to proactively reach out to their customers and offer to assist those who may be financially impacted. Many people remain unaware of flexible payment options that may be available to them.
For consumers, know that you’re not alone if you’re feeling stressed about your finances. There are things you can do now to help protect your credit health: we encourage you start or continue monitoring your credit. Checking your credit today may not put money in your pocket tomorrow, but doing so can give you an accurate picture of your financial situation, and may help you create a payback plan when you’re able. Your credit report includes all your lenders, so it can also help you to proactively contact them before there’s a problem, which can help keep negative items from appearing on your report.
We’ll continue to provide updates each week to offer insight into how consumers are being affected, so that businesses and leaders can establish informed practices and policies to help people in this trying time.