Four financial lessons to take away from the pandemic

by Celia Cameron, AVP – Branch Manager

Our life experiences shape our attitude and impact our decisions. This affects everything from what we eat, where we vacation and how we spend, invest, and save our money. Events that are more recent tend to have a greater impact on human decision making, especially those that are traumatic.

Similar behaviors are appearing in society today due to the pandemic. The recency of these memories will influence the emotional and financial behaviors and decisions for decades to come. This behavior, called recency bias, is when we rely upon those experiences that are freshest in our memory.

Below are four lessons that we can take away from the pandemic to be better prepared in the future.

1. Consumers prepared for uncertainty by putting more of their dollars away in their financial institutions. They wanted to keep money where they could see it. Check to see if your financial institution offers any budgeting and spending tools, such as Finance360 at National Bank of Commerce. Here you can get a better understanding of where your money is being spent so when uncertain times arise you have a clear understanding of your finances.
2. Consumers opened savings accounts. But opening a savings account isn’t the final step, you need to utilize it! A good place to start is setting up automatic deposit so a portion of your paycheck is directly deposited into your savings account.
3. Look into a health savings account to build that nest egg for medical expenses. A high deductible health care plan is needed to open an HSA. A couple benefits include being able to make contributions pre-tax and using the funds to pay for qualified medical purchases.
4. And how about all those who started new house projects! A great way to finance those home improvement projects could be a home equity line of credit. Educate yourself on what types of products your financial institution offers.

One needs to go beyond simply knowing that the past doesn’t predict the future. We need to recognize our cognitive shortcomings and biases to keep them from clouding our judgment. Use these as lessons to be learned to better prepare and position your financial future.