How are Americans coping with their financial burnout?
- Americans are feeling financially overwhelmed due to sustained inflation and slow economic growth.
- Many consumers are now putting a greater emphasis on financial well-being, and have increased their reliance on digital banking tools.
Americans are more stressed about money matters than they've been since the 2008 financial crisis. They’re losing sleep and experiencing financial exhaustion – primarily due to inflation reaching half-century highs, eating away at paychecks, and slowing economic growth.
The Covid pandemic has been followed by macroeconomic challenges – a combination of the rise in consumer costs, decline in wages, and economic downturn has caused many people to feel burned out, according to a recent KeyBank survey. Two in five people (42%) have grown weary of rising costs, with the looming recession making it difficult to manage finances.
Millennials and younger generations (53%) are the most impacted, followed by Gen X (47%) – they have fewer emergency funds compared to their older counterparts. Meanwhile, Boomers and Gen X are stressed about managing their retirement funds as they tighten their purse strings and tap into their savings to maintain their standard of living.
After coming out of a global pandemic and experiencing economic turmoil, consumers have changed their mindset. They want the ease of access to manage their finances no matter where they are, making digital banking a preferred choice – 72% of consumers are comfortable with online banking and 65% prefer using mobile banking apps.
As digital adoption is on the rise, confidence in online tools is growing. Bill pay (67%), checking credit scores (64%), and transferring funds between accounts (62%) continue to be the most popular digital tools. Easy and independent access to services makes consumers feel more self-reliant and in control of their money, with 46% of consumers turning more to digital tools now than they did in 2021.
With more opportunities to spend, Americans are also taking steps to be in tune with their health and financial well-being. Many are becoming mindful of their discretionary spending and comparing current outflows from years prior in a move to regain control of their finances. As many as 39% of Americans are spending less and sticking to a budget to get financially organized.
As people fall behind in achieving their financial goals, they have begun to better identify and prioritize “needs” versus “wants” — and what falls into those categories has started to evolve.
“Determining what you can afford to spend is the first step towards regaining control of your finances. Once a budget is established, you can put those funds aside, or start saving part of every paycheck, to meet your needs and avoid dipping into emergency savings,” said Jamie Warder, Head of Digital Banking at KeyBank. "Safety measures to protect finances could also include tasks as simple as knowing how much you spend on subscriptions or regularly checking any auto drafts from your account."
It looks like most people are comfortable with being flexible in their financial planning. In fact, almost four in five people (77%), and 82% of Millennials and younger consumers, are ready to make changes by curbing their spending habits and tracking expenses, compared to 73% of older age groups.
But the survey also found that around two-thirds of consumers (including 77% of Millennials and 62% of Gen X) who made a large purchase last year still intend to make at least one big purchase this year.
As technology makes headway and consumers actively seek providers that offer easy, remote, and customized experiences, banks are expected to keep pace by providing advanced proactive digital banking platforms.
While this might appear to be a challenge to many financial institutions, it could also be seen as an opportunity for them to increase customer retention and fortify relationships with consumers – making them feel heard at all times.
For the same purpose, banks are investing and spending heavily to upgrade and scale their in-house tech, as well as partner with fintechs to meet the technology demand. However, customer education and awareness around financial literacy are important elements that banks tend to sometimes overlook.
“Aside from introducing new digital features, banks should also make sure that their customers understand and use their existing features to the best of their ability,” added Warder.
On their end, consumers can also take charge to grow their financial awareness and seek out ways to build a long-term plan by consulting a financial expert or visiting a bank branch.
People who took this route reported experiencing growth in their financial awareness (85%), and agreed that access to information (55%) and digital banking tools (47%) are areas that make them feel more financially resilient.