Younger Americans Hurt Most by Financial Stress During Covid

In the year since the COVID-19 Pandemic began impacting all facets of American life, new data shows young adults are three times more likely to say they are experiencing pandemic financial stress compared to older adults. Three in four younger Americans ages 18 through 34 (75 percent) say they have been at least somewhat stressed about their financial situation since the pandemic began, compared with about 1 in 4 (27 percent) older Americans ages 65 and up. This according to new research conducted by The Harris Poll on behalf of the American Institute of CPAs (AICPA).

“Financial stress at any age can have a negative impact on a person’s wellbeing. For many younger Americans, this is the first time they have experienced this level of economic uncertainty, whereas older generations have already lived through recessions and depressions,” said Gregory J. Anton, CPA, CGMA, chairman of the AICPA’s National CPA Financial Literacy Commission. “Keeping perspective and finding comfort with what you can, and can’t, control is a good starting point to help alleviate financial stress.”

Financial Stress Impacting Mental Wellbeing
Since the start of the pandemic, Nine in ten young adults who have experienced stress about their financial situation (91 percent) say it has had a negative impact on their mental wellbeing, including 3 in 5 (59 percent) who say the negative impact has been major or moderate. For older adults, the prevalence of financial stress having a major or moderate negative impact on their mental wellbeing is less by nearly half (33 percent).

The study found that among young adults who said that they experienced stress about their financial situation, nearly all of them (91 percent) have had it impact their everyday life. This most commonly manifested itself as feeling sad or down more often than normal (52 percent), frustrated more often than usual (49 percent), or having trouble sleeping at night (48 percent). Lack of interest or enjoyment in normal hobbies (45 percent) and changes in eating patterns (44 percent) are also prevalent symptoms of financial stress in young adults.

Younger Americans consistently show higher rates of psychosomatic symptoms, like feelings of sadness and frustration, or lack of interest in normal hobbies, compared to older Americans. Among older adults who have experienced stress about their financial situation, about two-thirds (68 percent) have had it impact their everyday life, most commonly having trouble sleeping at night (41 percent), feeling frustrated more often than normal (40 percent), or feeling sad or down more often than normal (31 percent).

Steps to Help Manage Financial Stress
The good news is you don’t need to be held hostage by financial stress. There are several steps Americans can take to help reduce financial stress and anxiety. The AICPA’s National CPA Financial Literacy Commission recommends these three steps as a starting point.

1. Keep perspective and know what you can (and can’t) control

Markets go down, but they also go up. These fluctuations are often out of your control. But it is generally easier to manage finance-related stress if you understand the financial issues that can be addressed, and which are out of your control. One great way to take control of your finances is to build a solid financial plan. A CPA can help you determine your unique retirement and savings needs as well as investment growth targets, and then incorporate those pieces into a tax-efficient financial plan to help you reach those goals.

2. Take inventory of your finances

It’s important to know where you stand financially, including regularly reviewing your spending habits, debt levels, savings and investments, and credit reports and scores. Start by reviewing your cash flow. It’s important to know how much is coming in, where you are spending, and where you can cut expenses and increase savings. You will need to inventory all debt and categorize it by type, institution held, interest rates and maturity dates. Also look at all recurring costs, such as utilities, to determine what must be paid each month.

3. Find opportunities and tools to help you today and in the future

One great way to reduce your financial stress it to put much of your money management on autopilot. Take advantage of autopay options to reduce how many bills and payments you have to remember each month. At the same time, set up automatic savings plans to build an emergency fund for future economic downturns. You can also leverage apps and other software to track your spending and find areas to cut back.

How Financial Professionals Can Help Americans
Knowing what you can and can’t control is a great first step to help reduce financial stress. Knowing how to be strategic with what you can control is the effective next step. Financial professionals looking to develop the essential skills to best guide their clients, helping to mitigate potential financial anxiety, will benefit from in-depth technical sessions and panel discussions at the Advanced Personal Financial Planning (PFP) Conference at AICPA & CIMA ENGAGE 2021. The conference agenda has been curated to feature the most up-to-date practical information and technical knowledge in the areas of tax, retirement, estate, risk management, investments and more.

Additional Survey Findings:

Financial stress is much higher for renters (72 percent at least somewhat stressed) than it is for homeowners (52 percent).
Overall, since the start of the pandemic more than half of Americans (57 percent) indicate that they have been at least somewhat stressed about their financial situation, including a quarter of Americans (27 percent) who have been extremely or very stressed.
Nearly all who have experienced stress about their financial situation (89%) have had it impact their everyday life, most commonly feeling frustrated more often than normal (50%), feeling sad or down more often than normal (48%), or having trouble sleeping at night (47%). Lack of interest or enjoyment in normal hobbies (39%) and changes in eating patterns (34%) are also concerningly prevalent impacts financial stress brings to daily life.
Nearly nine in ten of Americans who have experienced stress about their financial situation since the start of the pandemic (88%) say it has had at least some negative impact their mental well-being, including more than half (53%) say the negative impact has been major or moderate.