If you are like most people, you would be happy to never have to hear the word Covid or the phrase unprecedented times ever again.
The mere mention of a pandemic might make you want to shut your eyes and cover your ears. But before you groan and close out of this tab, we have just one question for you: What have you learned?
Very few of us emerged from the (brace yourself) COVID-19 pandemic financially unscathed. According to a 2021 survey from the Pew Research Center, over half of non-retired adults say the economic impact of the coronavirus outbreak will make it harder for them to achieve their long-term financial goals.[1] One in ten of those adults don’t think they’ll ever fully recover. Additional economic, political, and physical stressors placed undue strain on many families and relationships, while some people seemed to grow closer than ever—but what accounts for this disparity?
In a study conducted in the summer of 2020, Heather Kelley and her colleagues, including Dr. Ashley LeBaron-Black, observed firsthand how financial stress linked to the Covid pandemic affected relational well-being, defined in terms of relational conflict, emotional closeness, and relationship happiness.[2] In the diverse sample of 1,510 adults from across the United States, many reactions were predictably circumstantial; those who experienced increased financial stressors experienced greater tension in their relationships, and those who were less affected financially were, well, less affected. But for many, this was simply not the case.
Participants were invited to respond to open-ended questions including “Do you have any related thoughts or experiences regarding how financial stress related to COVID-19 impacted you or your family?” and “What helped you cope with this financial stress?” Based on their responses, researchers identified eight exacerbating factors that increased perceived financial stress and eight alleviating factors that contributed to a greater sense of wellbeing. As you read this brief summary, we hope you will reflect on your own experience with Covid-related financial stressors and your personal coping mechanisms.
The FAAR Model
The researchers’ findings agreed with Patterson’s family adjustment and adaptation response (FAAR) model, which asserts that families are constantly striving to maintain a balance between their own capabilities and life’s demands.[3] When overwhelming demands cannot be met by current capabilities, a crisis occurs. Families must drastically adjust their demands, abilities, or values in order to achieve a new state of equilibrium. Families have two options during this stage: they can either change in ways that threaten family wellbeing (maladaptation) or promote it (bonadaptation). In the face of adversity, we have the potential to attain higher levels of wellbeing than were possible before, what researchers refer to as post-traumatic growth.[4]
Exacerbating Factors
Over 35% of the sample reported that their financial stress increased from before COVID-19. The most common cause of financial stress was reduced income, in the form of pay cuts or reduced hours. Others were unemployed completely. The cost of living went up substantially, as did the prices of food, groceries, medicine, and other necessities. On top of that, many individuals took on additional responsibilities, such as homeschooling and providing financial assistance to family members who lost their jobs. These financial troubles were not limited to the here and now; many participants voiced concerns for the state of their long-term investments and retirement funds. Fluctuations in the economy paralyzed some to the point of being unable to cope.
Sound familiar? While your story may not be an identical match, any combination of these factors, however minor, can make for a bumpy ride.
Alleviating Factors
Over 15% of the sample reported that their levels of financial stress actually decreased during the COVID-19 shut-downs, and nearly 50% of the sample reported that their levels of financial stress had not changed. At least 114 respondents expressed gratitude for job security and found comfort in the fact that they still had an income, however limited their source of income may have been.
Because expenses associated with commuting, eating out, childcare, and travel were reduced significantly for many families, they were able to balance out the general increase in the cost of living. For many families, positive financial habits came into play as they continued to reduce spending, buckle down on budgeting, and save money. Other common strategies included seeking additional income (e.g., part-time gigs, jobs, more work hours, online surveys, donating plasma), maintaining or using investment strategies, relying on home-sourced food (e.g., food storage, gardens), paying off debt, couponing, and being a good employee.
A similar theme of past financial behaviors and emergency preparedness brought peace of mind during times of increasing financial uncertainty. “We had been diligent about saving money before the coronavirus so even though our investments tumbled we had money saved over as backup in case we needed it so there was minimal financial stress,” summarized one participant. Those who had already been working to pay off debt, build an emergency fund, and save consistently found it easier to get back on their feet. And of course, claiming government benefits provided temporary relief for thousands.
For things outside of their direct control, families found it helpful to focus on what they were grateful for and reframe their situation in a positive light. Instead of dwelling on what they lost, participants focused on what they gained, such as greater simplicity, time with family, and the opportunity to concentrate on the “more important things in life.”
Participants remained hopeful by avoiding controlling the uncontrollable and by acknowledging that their financial obstacles paled in comparison to difficulties others were facing. Many drew strength from religious practices such as prayer and meditation to maintain the same sense of hope. Common responses included relying on a belief in God, counseling with religious leaders, and turning to religious communities for support.
What’s Next?
Times of crisis have the potential to drive a family far apart or bring a family closer than ever before. The worst of Covid may be over, but here are some general principles to bolster the family’s “immune system” for the next time financial tragedy strikes:
- Build an emergency fund. Set aside a certain percentage of your earnings each month toward a rainy-day fund. It is recommended that your emergency savings cover at least 3-5 months of living expenses and should be used only in a real emergency. You can read more about building an emergency fund here.
- Diversify your income. Is your nine-to-five your family’s only source of income? If so, consider what you could do to bring in a little extra money each month. Regularly invest in both short-term and long-term savings accounts. Consider turning your skills into a side hustle where these skills could easily translate.
- Discuss as a family. Take time to reflect with your partner or with the whole family: How did you react to the everyday impacts of the COVID-19 pandemic? How did it shape your family’s well-being? How did you balance your demands and your ability to cope with those demands? Note what went well and make steps to improve.
- Express gratitude daily. Each day, find a way to communicate what you’re thankful for. Whether it’s taking turns at the dinner table, keeping a gratitude journal, or praying, establishing habits of gratitude will help your family develop a positive outlook on life and become equipped to weather the storms ahead.
Many of the aforementioned negative factors mentioned are unavoidable but may be compensated for with careful preparation and strong financial habits. Part of “moving forward” is learning from past mistakes and preparing for future challenges. As we do so, we will become financially resilient, strengthen our family relationships, and have peace of mind, no matter the obstacle.
[1]Horowitz, J. M., Brown, A., & Minkin, R. (2021, November 23). A year into the pandemic, long-term financial impact weighs heavily on many Americans. Pew Research Center's Social & Demographic Trends Project.
[2]Kelley, H. H., Lee, Y., LeBaron-Black, A. B., Dollahite, D. C., James, S., Marks, L. D., & Hall, T. (2022). Change in financial stress and relational wellbeing during COVID‐19: Exacerbating and alleviating influences. Journal of Family and Economic Issues. https://doi.org/10.1007/s10834-022-09822-7
[3]Patterson, J. M. (1988). Families experiencing stress: I. The Family Adjustment and Adaptation Response Model: II Applying the FAAR Model to health-related issues for intervention and research. Family Systems Medicine, 6(2), 202–237. https://doi.org/10.1037/h0089739
[4]Prime, H., Wade, M., & Browne, D. T. (2020). Risk and resilience in family well-being during the COVID-19 pandemic. American Psychologist, 75, 631–643. https://doi.org/10.1037/amp0000660