Americans Resolve to Pay Down Debt and Establish Emergency Funds, as Financial Situations Remain Shaky

New year, new financial situation? Not quite, at least not for most Americans. But as 2023 swings fully into gear, banking customers are thinking about proactive steps to combat inflation and gird for a possible recession.

The overall financial health[1] of most Americans remains troublingly low, but according to J.D. Power data, many Americans are contemplating making New Year’s resolutions to improve their situations. A significant portion of Americans are considering budgeting, saving, and paying down debt to fend off the effects of any further economic downturn. Unfortunately, while virtually all banking customers know action is needed, some still don’t know where start.

Resolving to Tackle a Recession

Americans are wisely considering what proactive steps in anticipation of a recession. When banking customers were asked what they were prioritizing to protect themselves against a recession, 45% said they might reduce spending, while 41% they might create or build up an emergency fund, and 40% said they might pay down existing debt.

Eighty-six percent of Americans say they have some level of concern about a recession, with higher levels predictably being seen among those with unhealthy financial situations. Interestingly, these concerns stay consistent across all age groups.

Aimlessly Drifting

While most Americans are thinking about what to do, some seem to feel frozen in place. In fact, a startling 25% of banking customers say they don’t even know where to start in preparing for a recession. That includes 43% of those that are classified as financially vulnerable.

A New Normal?

The percentage of financial healthy Americans has increased modestly from a 13-month low in November. The number of bank customers classified as financially vulnerable also moved in an encouraging direction by dropping two percentage points.

Americans’ satisfactions with their financial conditions reflects a similar trend, which could indicate a baseline expectation ahead of any potential economic downturn.

Navigating the Uncertain Future

As banking customers start to consider action to prepare for a recession, financial institutions will have to be similarly aggressive in touting their customer assistance programs. With a significant percentage of customers worried about a recession, but clueless about what to do to help themselves, a golden opportunity exists for financial institutions to be the guiding light through the storm.

Notably, bank customer satisfaction with their overall financial situations and the level of empowerment customers feel to improve those situations have been largely flat over the past year. While bank customers do not feel their banks are doing them a disservice by any means, they also do not feel like their banks are going above and beyond to help them navigate this period of financial stress.

Banks that want to seize this moment as an opportunity to solidify customer relationships will have to clearly communicate an action plan for Americans, particularly those that are having difficulty getting started with budgeting and scenario planning. Promoting debt and budgeting assistance programs would have the dual benefit of creating more satisfied customers, while helping people dodge the worst effects of a potential recession. Forward-thinking banks could reap the benefit in the form of a customer base that is not only more satisfied, but more loyal as well.

Find out More

This Banking and Payments Intelligence Report is based on responses from 4,000 retail bank customers nationwide and was fielded in December 2022. It was authored by Jennifer White, senior director of banking and payments intelligence at J.D. Power. Please contact us at the numbers below to connect with Ms. White or to learn more about the underlying research.

Media Contacts

Brian Jaklitsch; East Coast; 631-584-2200; brian.jaklitsch@jroderick.com

Geno Effler, J.D. Power; West Coast; 714-621-6224; media.relations@jdpa.com

[1]  J.D. Power measures the financial health of any consumer as a metric combining their spending/savings ratio, creditworthiness, and safety net items like insurance coverage. Consumers are placed on a continuum from healthy to vulnerable.