Financial Coping Strategies

How Households Are Staying Afloat During COVID-19

Melissa Gopnik & Dr. Daryl Collins
Categories: COVID-19Emergency SavingsIncome Volatility

When Commonwealth began conducting interviews in June 2020, 21 households in our study had already lost 50% or more of their income due to COVID-19-related job loss or a severe reduction in hours. By the end of July, these households still had not recovered this lost income. The reasons for households’ continued financial vulnerability included the inability to find another job or hours not being restored; unemployment insurance benefits were also a contributing factor, as some of these households were not approved, did not qualify, or did not apply for these benefits.

During this sustained and dramatic loss of income, households are employing a range of financial coping strategies to stay afloat. In this brief we highlight the strategies that households have used most, how impactful they have been, and how their use has changed over time. Low- and moderate-income households have long relied on various financial coping strategies to get by, but the extreme uncertainty and scale of the COVID-19 economic recession will test these households like never before. The impact of these households’ coping strategies will have lingering effects on businesses that go unpaid as well as on the workforce. As the economy struggles to recover, the support of policymakers, financial services providers, and private sector companies will be critical in building financial resilience through this crisis and beyond.