Balancing Pent-Up Consumer Demand With Savings Goals As COVID-19 Restrictions Ease

by Ben Gran

Forbes Advisor

Thursday April 15, 2021

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The coronavirus pandemic has been devastating to many small businesses and millions of jobs. And yet, the lockdowns and stimulus checks have also helped millions of Americans save more money.

After months of stay-at-home restrictions — and as the COVID-19 vaccines get rolled out nationwide and the economy starts to reopen — many Americans may be sitting on more savings than usual, and we're all waiting to see how they spend it.

The Federal Reserve has said that, as of October 2020, Americans had an extra $1.1 trillion of savings. The National Retail Federation (NRF) reported significant increases in retail spending in 2020, due in part to the shift to online shopping. For 2021, the NRF predicts an ongoing surge in retail spending, with a projected annual increase of 6.5% to 8.2% over 2020.

Is it possible that the end of the pandemic will bring an economic boom? And how can you cope with the conflicting urges of pent-up demand for shopping and fun experiences, versus the need to keep saving, investing and making wise financial decisions for your future?

Here are a few ideas for how you can navigate the post-pandemic reopening with a balance of smart spending and saving for tomorrow, as everyday life becomes more possible again.


Reassess Your Budget

The pandemic has caused millions of people to revamp their monthly budgets and modify their spending habits. Whether or not you've suffered a job loss, your day-to-day spending has been affected: Some people have been spending more money on streaming video subscriptions and less money on gym memberships; others have been spending more on meal delivery apps and less on groceries.

Whatever changes you've made in your budget during the pandemic, take this moment as an opportunity to reassess your spending patterns. Now that the vaccines are here and the pandemic seems to be ending, consider what you would like to change about your monthly spending. If you've been saving more than spending, it's an excellent time to make some of your better budget habits permanent rather than temporary.

For example, some people may find that they have enjoyed cooking more at home during the pandemic. If you've worked from home for the past year, you may have saved money on your commute. Does your family need two cars? Can you delay a new car purchase for one more year? Assess your situation: What about your stay-at-home, quieter lockdown life would you like to continue beyond the pandemic?

Look for ways to identify cost savings in the way you live now, and keep those savings going into the future. Don't assume that the pandemic lockdowns and social distancing are the only reasons you've been saving money. You also may discover some new savings opportunities as everyday life opens up.

For example, instead of spending money on grocery delivery apps (and tips and price markups), you may be able to save money by doing your own grocery shopping again. Or you may prefer to socialize with friends at each other's homes, saving money on drinks and restaurant dinners. There are ways to save money and still celebrate life after the pandemic.


Pay Off Debt

If you've saved up a pile of cash and aren't sure what to do with it, before you go out and make a big purchase or plan an expensive vacation, consider using that money to pay off debt.

Many Americans during the pandemic have been paying their credit card bills on time, which is good news. But if you still owe a balance on a credit card, or if you have some other high-interest debt that you could pay off with a one-time lump sum of cash from your savings, the end of the pandemic might be the right time to wipe out that debt.

As the pandemic ends, more people expect that the economy will continue to recover and that job growth will return. If these predictions are realized, this may give more people the confidence to move money out of savings and pay off debt.


Stick to Your Savings Goals

If you don't have credit card debt and feel financially secure, this could be a good opportunity to reassess your overall savings goals. Are you putting enough money into your retirement savings? Have you stopped contributing to your 401(k) or other retirement plan at work because of uncertainty during the pandemic? Now may be a good time to revisit your retirement savings.

If you have a lump sum of cash built up in your bank savings account, you might want to consider putting some of that money into a Roth IRA or a 529 college savings plan. Especially if you received COVID-19 stimulus checks that you didn't spend on debt, bills or urgent expenses, this could be a useful way to boost your retirement savings with a one-time gift from Uncle Sam.

The pandemic was a reminder to everyone of just how drastically life can change, and how the economy can be thrown into uncertainty and crisis. Many Americans may want to keep boosting their savings to protect themselves from the next crisis in life. Having a few months' worth of expenses in an FDIC insured emergency savings fund can offer priceless peace of mind, no matter what happens with the economy.


Splurge Smartly

The pandemic has been a time of fear, grief, and disorientation for billions of people worldwide. So now that the worst of it seems to be ending, it's no wonder that many people want to go out and celebrate and start living life to the fullest again. We may be on the cusp of a new Roaring Twenties, as people revive their spirits with travel, live entertainment, parties, and nightlife.

Here are a few tips for how you can spend smartly to get the most out of your money:

  • Make spending social. People are longing to reunite with friends and family. Why not get more bang for your buck by pooling your resources? When it's safe to do, book a family vacation at a resort. Get together with friends for a big party. Have a destination celebration to ring in the start of new life. Combining travel with friends and family can help everyone rebuild their social connections while also splitting costs for lodging, food, and more.
  • Invest in experiences. Studies have shown that people tend to value experiences more than things. Especially after a year when people were cooped up at home, there is likely to be a massive surge of demand for travel, live music, sports, concerts and theater, restaurant meals and other "in person" experiences. What experiences did you miss most during the pandemic? How can you spend in a targeted way to get more of those experiences into your new life?
  • Budget for your spending spree. If you've used the pandemic as an occasion to get your finances in order, get out of debt and become a smarter saver, you may be reluctant to run out and start spending wildly. So don't. Permit yourself to spend a certain amount on post-pandemic celebrations. Set a budget. Save up for a big trip. Put some limits around how you use your savings, so you don't feel out of control. Give yourself permission to splurge on a few experiences, items, or categories of spending that matter most to you, and keep your savings safe.

    The pandemic has been a stressful, sad, isolating, traumatic experience for so many people. Even for people who were fortunate enough to avoid getting infected by the virus, or who did not lose loved ones to the disease, this has been a historic time of crisis and grief. Surviving the pandemic is a reason to celebrate. Life after COVID-19 is offering the possibility of renewal and rebirth.


    To Brighter Days Ahead

    So, by all means, celebrate. Do what makes you feel fully alive. But along with all the fun and celebration, be sure to make some prudent financial moves to protect your savings, invest for the future and build a stronger financial foundation. One way to honor the pandemic's lessons is to build greater resilience into our lives and live with greater purpose and a shared sense of meaning. Building a better foundation for your personal finances can help you be a more stable and positive force for the people you love.

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