Top 10 lessons we learned in 2020


We look back at the biggest financial lessons from 2020 that can help us smarten our savings, reduce anxiety, and build financial resilience.

Can you believe we made it to 2021? We can already look back on the past year and ask ourselves, “How did I navigate this challenging time? And what have I learned?”

“The global pandemic made us look at our lives, our spending and saving, who we are, and what’s really important,” says Maureen Kelley, a Certified Financial Therapist and founder of MADRE, offering financial well-being services for families.

While the financial and emotional impacts of 2020 are still being felt, Kelley says there are many important lessons we’ve learned as a result. Our financial habits have changed, our attitude toward saving has improved, and we’ve become more resilient people. And those are things to be proud of.

Here are the top 10 financial lessons we learned from 2020:

1. Everyone needs an emergency savings account

Unemployment spiked in April 2020, hitting 14.7%, according to the U.S. Bureau of Labor Statistics—a huge jump from 3.5%, where it was only two months earlier. By September 2020, the national unemployment rate had improved at 7.9%, but that’s still more than double what it was before.

While the recovery is ongoing, we learned a huge lesson: We all need to be saving for emergencies.

If 2020 taught us anything, it was the possibility that the unimaginable could happen. Now is the time to de-stress your mind and finances before the next economic event by creating a dedicated emergency savings account. It’s important to have an account that’s liquid and touched only during true emergencies. Slowly build the balance to hold at least $1,000, then work your way up to three months’ worth of living expenses. Automate the saving process by creating an automatic transfer or direct deposit every month, funneling from your income stream(s).

When we say everyone needs this account, we mean everyone. According to the U.S. Bureau of Labor Statistics, even healthcare workers experienced a record number of job losses during the 2020 pandemic, in part because hospitals were forced to freeze revenue-boosting surgeries and procedures in response to COVID-19. 

2. You can be great at saving, even if it doesn’t come naturally

“There are a bunch of folks who aren’t great at saving,” says Brian Ford, Head of Financial Wellness at Truist, “but they’re really crushing it in this area and they’re doing it because they save first and then save automatically.”

Saving gives us greater confidence, and across the board, 2020 forced many of us to make changes to problematic spending and saving habits. There were growing pains, but austerity showed us we can make positive financial changes and save in areas that don’t create emotional strain.

“There was a reset of values, looking inward and saying, ‘What is important in my life? Who are the people I spend time and money with?’” says Kelley. “We’re learning how to redistribute our money and save more.”

She explains, for instance, that being forced to cancel a gym membership due to COVID-19 precautions could have saved you money while reaffirming how important exercise is in your life. Perhaps you learned how willing you are to run outside or do bodyweight exercises in the living room versus paying for a membership. (If, on the other hand, you realized you definitely do need that gym membership, that’s completely OK as long as you can budget for it appropriately.) 

3. Defined values lead to happier saving (or spending)

It may not feel like we did much in 2020 apart from streaming our favorite shows and learning to bake sourdough. Truist Culture Alignment and Activation Consultant Bright Dickson says some people may have saved money because they weren’t eating out, doing activities, taking trips, or going to shows.

“Now that you have the money, what will you do with it? What you choose to do with that money is really based on your values—how you spend is meaningful,” Dickson says. “Maybe you spend giving to a cause that means something to you. Maybe you save, or pick up a new hobby that’s really enhancing and rejuvenating.”

If you’re in a situation with extra income, use it wisely and in a way that makes sense for you. When in doubt, add it to the emergency fund. 

4. The home is our haven ...

… and office … and school … and gym. Home became our personal planets in 2020 as businesses shut down, work went remote, and schools got virtual. We learned that having a peaceful, clean home environment can lessen our anxiety. And we were willing to spend on it.

More than 75% of homeowners in the U.S. carried out at least one home improvement project since the start of COVID-19, according to Porch. The median amount homeowners spent on improvements was $17,140, with an average of five improvements per household.

Where did the money come from? Porch says the majority of people dipped into savings, while others used a credit card or stimulus check.

Spending money on home improvements can be highly beneficial. Optimizing HVAC systems can cut down energy bills, and redoing the kitchen increases the value of your home and the joy it brings you.

If you have equity in your home and are looking for a way to fund a home improvement project, a home equity loan or line of credit can be an affordable option. 

5. Monitoring credit card debt and spending is key

Kelley says debt remains one of the dominating financial factors impacting our emotional well-being.

“If you can maintain a low amount of consumer debt, have a financial plan, and set goals, you’ll be in a state of good financial health,” she says.

According to a survey, in March and April 2020, 1 in 8 American cardholders entered a credit card hardship program due to the pandemic.Disclosure 1 For many, these programs resulted in adverse effects on their accounts. Times were tough—but we’re also learning to adapt. The same survey found about 3 in 5 American cardholders took a positive action with their credit card in 2020, such as paying off balances.

One lesson to take away from 2020 is to monitor credit card spending and begin reducing debt. Consider starting with debts under $1,000; then tackle the debt with the highest interest rate. 

6. Scammers aren’t taking a break

2020 brought unique financial challenges for keeping our savings safe. Financial scammers capitalizing on the global pandemic used a variety of schemes that included:

  • COVID-19 vaccine/cure
  • Air filters
  • COVID-19 testing
  • False grocery/prescription pickup
  • Fake COVID-19-related charity
  • “Person in need” appeals
  • COVID-19 government imposters

Safeguarding personally identifiable information and monitoring financial accounts and credit reports for any suspicious activity continues to be important. 

7. Avoid overcorrecting—and take your recovery slowly

It’s easy to say, “Don’t panic,” but sometimes it’s hard not to—especially when there’s a global pandemic. Looking back, we learned the benefits of staying calm and recovering slowly and steadily.

“This year has led to fear and uncertainty about what lies ahead, so it’s important to have financial habits that support the unexpected and to have a ‘financial cushion,’” says Megan Ford, M.S., LMFT, a financial therapy expert at the University of Georgia. “However, it’s also important not to overcorrect and act out of fear or panic.” 

She adds, “We need to leave a little space for fun and pleasure, especially as 2020 has made this harder. Finding the happy medium where money can be saved and spent in a steady, balanced way is necessary in both pandemic times and beyond.”

Communities saw the negative effects of overcorrecting amid the pandemic when shortages of masks and toilet paper sparked a collective scarcity mindset. Scarcity mindset—the belief that there will never be enough, which results in feelings of fear, stress, and anxiety—was once a beneficial evolutionary advantage, but in 2020 it contributed to financial and personal stress and overcorrecting.

Research shows scarcity mindset can affect decision-making negatively, predominantly affecting people who experience scarcity after having abundant resources. Sound familiar?

Looking back, we’ve learned to approach shortages and panic with more calm for the sake of spending only on what we need and not buying into scarcity frenzy. 

8. Caretakers are teaching kids how to think and feel about finances

During 2020, many parents and caretakers found themselves spending more time at home with kids. Consciously or subconsciously, caretakers are teaching kids about finances, and adult responses to hardships are becoming new narratives for kids to associate with the topic of money.  

“In 2020, we learned how important our attitudes are. Parents with children at home have to be so mindful of how they are managing their anxiety, especially around money. Kids are listening and watching,” says Kelley. “Parents are stressed, fighting about money, and scared about saving. How we act is key to the financial well-being of our children.” 

9. Diversify investments to help mitigate losses and anxiety

The 2020 pandemic caused a rollercoaster of market volatility, which put an emphasis on the importance of investing best practices like diversifying across industries and asset types using trusted investing tools like mutual funds and exchange-traded funds (ETFs). If you have investments, meet with your financial advisor to ensure they’re properly diversified to align with your goals and investing timeline.

10. Connection saves in so many ways

Social distancing meant using more virtual tools for quality time with friends, family, and co-workers. Personal and community connections have been a saving grace for individuals quarantined and stuck at home.

“We learned that having a sense of community and being connected to others is really important,” says Kelley.

We were also able to help deliver support in a time of uncertainty by giving back to the community wherever possible. Goodwill Industries and the Salvation Army saw surges in donations in spring of 2020, which stocked locations with additional necessities for those in need.

Collectively, we learned new ways to share our time, talents, and resources to make the world a better place.

This content does not constitute legal, tax, accounting, financial, or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.