COVID-19 is changing how Americans save, poll reveals

Bipartisan Policy Center Fellow Jason Fichtner joins Yahoo Finance’s Zack Guzman to discuss the latest outlook on stimulus negotiations, as a new poll from Funding our Future finds that 51% say they are more likely to save for the future following the COVID-19 pandemic.

Video Transcript

ZACK GUZMAN: Meantime on the fiscal side here, as we await the, I guess, the concessions being made between Republicans and Democrats, as White House Chief of Staff Mark Meadows is supposed to be meeting with the Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer and Secretary of the Treasury Steve Mnuchin right now, I mean, we're-- we're watching this play out in real time. Of course, Democrats still pushing for the extension of those benefits that we're seeing roll off here, or seen roll off, when we think about that additional $600 coming from the federal government for those Americans still on unemployment.

And that obviously is doing a lot here to restore, or at least maintain, confidence here on the part of consumers. But as that rolls off, a lot of question marks around what might happen here in the next few weeks when we think about what needs to be done on that front. And we want to bring in our next guest for a chat on that. Jason Fichtner is Bipartisan Policy Center fellow. And, Jason, I mean, when we think about what is to play out here, we're-- we're thinking about what the actual impact is here for Americans and their savings and their spending. So what are you seeing play out in terms of confidence on that front so far?

JASON FICHTNER: It's interesting, Zack. First, thanks for having me on, and part of this is to talk about a survey they recently did with about 500 hourly workers done by DailyPay, Funding our Future and Edelman Financial Engines. And what we're finding is over half the people we surveyed-- again, these are hourly workers-- are now more likely to save for the future as opposed to those who didn't before. And what they're finding is there is now a need for this rainy day savings account, which most people didn't think they either needed or weren't saving for when the economy was doing so well that that rainy day seemed like it was never coming.

And now, of course, it's here. We had the great financial collapse of 2008. Now we've got one caused by a pandemic. And we have roughly 30 million people on unemployment insurance or pandemic unemployment, the-- the additional $600 you mentioned, and that has expired at the end of July 31. And Congress and the White House are trying to come to a deal, and we'll see if that happens.

ZACK GUZMAN: Yeah, the other interesting thing from-- from your survey that you guys conducted there was that 40% of Americans said they're worse off since the pandemic shut down most of the economy in March. And additionally, 50% said it was finding-- said they were finding it difficult to get by or just getting by. 40% saying they had difficulty paying bills each month. So when we think about that rolling off, I mean, clearly that would have an impact on-- I understand you're saying that people would be more willing to save for the future. But if you don't have any money coming in, forget saving for the future if you're having a hard time paying bills that you need to pay now.

JASON FICHTNER: Yeah, no, that's exactly correct, and this is when we start thinking about what happens after the pandemic when we sort of return, if there is, whatever the new normal looks like. But it's how do we help people save for the future and save for their retirement and save for a rainy day. And this is where one of the things comes in, like, with DailyPay, what happens if you can start saving on a daily paycheck as opposed to a paycheck every two weeks or a paycheck every month? And, you know, I teach people economics, and it's interesting.

If you go out and survey people and say, could you save $350 a year, a lot of people say, no, that's too much. I can't save 350 a year. Well, could you save $1 a day? Oh, sure, I can save $1 a day. Well, all of a sudden, there's your $350 a year. So we're trying to find ways to incentivize and change the-- the way people can save. And that's what we've got to start thinking about post-pandemic is, how do we help lower income and hourly workers set up designs and systems so they can save and make it easier for them to save, like rainy day accounts, sidecar accounts, or something like that?

ZACK GUZMAN: All right, well, you're from the Bipartisan Policy Center, so let's get a-- let's get into some bipartisan talks going on right now when we think about what could come through here in this next wave of relief. Obviously, it seems like both sides are aligned on that extra stimulus check of up to $1,200. We've seen that before. But again, these unemployment benefits still in question. But beyond both of those things, I mean, when you're talking about behavioral elements of all this, we've seen even Mark Cuban come out and talk about how Americans right now, when you have all these uncertainties, might rein in their spending in general.

So even if you do give you a stimulus check, it might just become a future savings check as more people are afraid to go out and actually spend, or even leave the house. A lot of that, I think, gets overlooked in these discussions as well. So what's your take on maybe what need to change here in relation to what we've seen come through in phase 3 and the CARES Act and how we might need to address some of those issues now?

JASON FICHTNER: Yeah, that's fantastic. And one of the things we try to talk about as economists when thinking about recessions is, are you trying to do stimulus, or are you trying to do relief? And right now, I think stimulus is probably the wrong approach because people are being asked to stay home or our economy is looking to shut back down again. So we really need to talk about relief, and the relief has to be targeted. So the first round of stimulus checks went to a lot of people who didn't actually need them.

And I think you've seen now some negotiations about the additional $1,200 going out being more targeted, lower income-- lowering the income cap on who gets it, making sure it only goes to those who need it. I think that's very important. And same thing when it comes to the additional unemployment insurance. The $600 check was basically designed-- I think what most people thought, this was going to be a temporary pandemic. Maybe we'd be home for two months, and that would be it. It wouldn't be long term.

And so we wanted to make sure people have enough money they didn't feel like they had to go to work. They could stay home. But we're finding out, depending on the data you look at it, is up to 2/3 of people receiving benefits are making more through unemployment than they were making through their job, and that's a disincentive potentially to go back to work as the economy starts to open again. So where's that sweet spot? And that's what you're sort of seeing now play off between the Democrats and Republicans.

$600 is probably too high. Zero is definitely too low. What's the middle? Is it 200, 300, 400? Should it decline? Should it decline with the unemployment rate? Should it decline with time? I think those are the things they're working out now. And I'll tell you, when it comes to Congress, nothing makes them act more than a crisis. They're at a crisis now. They've passed the deadline. My guess is, it won't be $600 a week and it won't be zero. It'll be somewhere between where that number is and how fast they can get there is a good guess.