People in the United States saw their account balances decline more rapidly during the 2021 holiday season than during the 2020 holiday season, partially due to increased spending on recreation and eating out. Several factors, including accumulated savings during the COVID-19 pandemic, the ongoing economic recovery, and rising costs of goods due to inflation, likely contributed to these trends. Individuals who experienced financial hardship in the past year saw their account balances decline most rapidly, showing that many people remain vulnerable even as the economic recovery has progressed. Higher inflation and the expiration of child tax credits alongside other government relief programs may drive further declines in the coming months and herald the end of the financial health boost that some people experienced during the pandemic.
This analysis is based on transactional and account records from study participants who agreed to share their data through the Financial Health Pulse™.
Spending on Recreation and Eating Out Surged in Q4 2021
Spending on eating out and recreation was higher across the entire fourth quarter of 2021 than in the fourth quarter of 2020. In December 2021, average monthly spending on eating out was approximately $72 (33%) higher than spending in the same category in December 2020. Likewise, average monthly spending on recreation was roughly $15 (nearly 60%) higher in Q4 2021 than in Q4 2020. During this time period, inflation increased at the fastest rate in decades, suggesting that the rising costs of goods may have been partially responsible for driving these trends. If high rates of inflation continue in the coming months, balances in liquid accounts may decline further as people draw upon their savings to make ends meet.
Financially Struggling Consumers Have Become More Vulnerable
People who reported experiencing financial hardship early in the pandemic appeared to end 2021 in a more vulnerable position than the prior year. Among individuals who said they struggled to pay for food, housing, or healthcare in the past 12 months (23% of the sample), median liquid account balances remained relatively constant in 2020. However, in 2021, liquid account balances among this group declined by $986 (40%) over the quarter, though the change was not statistically significant.
While multiple economic factors may have contributed to these trends, the expiration of government benefits likely played an outsized role for this group. Pandemic relief policies – including expanded unemployment insurance, eviction moratoriums, and stimulus payments – largely ended in 2021, forcing many people to draw upon their savings to make ends meet. The ongoing expiration of pandemic relief policies, including the expiration of child tax credits, may further jeopardize the financial health of people who experienced financial hardship and lead to increases in poverty, while ongoing inflation will disproportionately affect people with lower incomes and further strain household balance sheets.
Many Consumers Remain Vulnerable as Pandemic Enters Third Year
People spent down their savings balances more rapidly during the 2021 holiday season than during the 2020 holiday season. Accumulated savings during the COVID-19 pandemic, the ongoing economic recovery, and rising costs of goods due to inflation likely contributed to these trends. Nevertheless, the pandemic continues to have an unequal financial impact on Americans, with signs that struggling consumers are becoming more vulnerable. The absence of government relief programs and evolving macroeconomic conditions are poised to shape personal finance trends in the coming months. We will continue to monitor these trends in future Pulse Points.
About Our Methodology
This analysis is based on transactional and account data from 218 members of the University of Southern California’s consumer panel who agreed to share their 2020 and 2021 data through a secure platform that leverages Plaid’s API. To derive inflows, outflows, and liquid account balances, totals were calculated over a past 30-day rolling period for each day. For liquid account balances, the median of the sample on each day was used. For spending on eating out, the sample mean on each day was used. Locally weighted scatterplot smoothing (lowess) with a 10% smoothing window was applied to generate trend lines. Liquid accounts include checking accounts, savings accounts, prepaid cards, money market accounts, and cash management accounts.
To help interpret the transactional data, Pulse survey response data were merged with these data. Any figures and statistics that are explicitly referenced in the text are statistically significant within a 95% confidence interval. Trends that are described more generally should be considered directional and descriptive in nature. Please see the complete Financial Health Pulse transactional methodology overview for more information on data collection and analysis.