COVID-19 Crisis Further Worsens Wealth Inequality in U.S.
While it’s no surprise that the pandemic has shaken the financial status of many Americans, a new Financial Habits survey from New York-based TIAA reiterated that the wealth gap is growing between the haves and the have-nots.
More than half of Americans said their household finances have changed because of the COVID-19 pandemic. In fact, 24% said they’re better off, while 29% said they’re worse off.
More than 1 in 3 earning less than $50,000 are worse off
Among Americans with annual incomes of less than $50,000, 37% said they’re on shakier financial footing because of the crisis. In comparison, only 15% of Americans with annual incomes of more than $100,000 a year said they’re worse off.
Nearly 6 in 10 (57%) of Americans who have suffered a pandemic-related financial setback said they feel their money situation will not change or will continue to get worse.
Here is a closer examination:
- Americans earning less than $50,000 a year share the same sentiments. Within this income group, 16% weren’t sure whether they’ll save or spend more money moving forward. And 26% said they aren’t sure how they’ll pay for post-crisis plans.
- Lower-earning Americans are more likely to spend their economic impact payments. Of those earning less than $50,000, more than 50% who have experienced a financial setback said they plan to use the economic impact payments, also known as stimulus checks, to cover groceries or bills. More than a third said they would invest that money into a retirement account or savings.
- Older Americans were harder hit. Among adults ages 45 to 64, nearly 4 in 10 said they’re worse off money-wise because of the pandemic. This is in comparison to 27% of respondents ages 35 to 44 and 24% of those ages 18 to 34.
Higher earners more eager for vacation, shopping and dining out
While American adults want to engage more in activities, Americans with lower incomes said they’re less likely to participate than those who earn more. Those who earn less than $50,000 are less likely to:
- Take a vacation (41% versus 62% of $100,000-plus earners)
- Shop at locally owned stores (28% versus 42% of $100,000-plus earners)
- Dine at restaurants (33% versus 46% of $100,000-plus earners)
Higher earners who rake in $100,000 or more a year are more likely to budget and save to visit friends and family than those who make less than $50,000 (55% versus 46%). Nearly half plan on taking three or more vacations. In comparison, 38% of those earning less than $50,000 annually do not know if they’ll take or plan a vacation as the crisis subsides.
A greater focus on building positive financial habits
Whether they’re worse off or better off financially due to the pandemic, most respondents agree that they’ve prioritized creating emergency savings. They also want to save more for retirement. However, nearly half of those earning less than $50,000 (44%) said that it’s not likely that they will be able to save for retirement in the near future. Conversely, 72% of those making more than $100,000 said they’ll likely save for retirement.
If you’re experiencing a financial setback because of the pandemic, you can take steps to avoid digging a debt hole:
- See how you can lower your expenses and start saving for an emergency fund
- Stay on top of credit card payments
- Review your credit reports regularly
- Understand how to maintain a good credit score
Methodology: KRC Research conducted an online survey for financial services provider TIAA (Teachers Insurance and Annuity Association of America) between Feb. 19-22, 2021, that included 1,003 U.S. adults.