Each fall, the Federal Reserve’s Cash Product Office (CPO) conducts a survey taking the temperature of consumer payment systems and practices. When the Federal Reserve conducted their survey and published their 2020 findings, we were a couple of months shy of the beginning of the COVID-19 global pandemic.
As we have come to understand over the past year, the COVID-19 pandemic has drastically affected the way we conduct our business, our finances, and our most basic tasks. Because of this, the Federal Reserve decided to update their findings with supplemental information of how consumers were making payments during the pandemic.Their publication, Consumer Payments and the COVID-19 Pandemic: A Supplement to the 2020 Findings from the Diary of Consumer Payment Choice, states in its introduction:
“In October 2019, the Federal Reserve conducted the sixth Diary of Consumer Payment Choice (Diary)1. Approximately two months later, the first case of COVID-19 was identified in China, and the virus has since spread to create a global pandemic. As the number of COVID-19 cases increased worldwide, U.S. cities and states began issuing stay-at-home orders in March 2020, and global demand for U.S. currency increased at record rates. Since March 1, the Federal Reserve has issued approximately $130 billion of currency into circulation. Because the 2019 Diary was conducted before the spread of COVID-19, it does not reflect payment behavior changes caused by the pandemic. Given the dramatic increase in demand for currency, along with anecdotal evidence of changing consumer payment practices during the pandemic, the Cash Product Office (CPO) sought to capture data regarding how the pandemic may have affected individuals’ payment behavior.”
The supplemental survey received 2,737 responses in May 2020. The survey asked “questions focused on three general themes: cash holdings, changes in payment behavior, and cash avoidance. In general, participants reported holding more cash on their persons and especially as a store of value in their homes, compared to trends reported in the 2019 Diary.”
When asked if they increased their cash on hand, results found that on average the amount of cash on hand increased from $69 to $81, which is a 17% increase from pre-pandemic levels. Additionally, people who withdrew extra cash increased their holdings.
Source: Federal Reserve Bank of San Francisco
The survey also found that the amount of cash stored not on their person increased for survey respondents as well. “The value of cash stored elsewhere was far greater for all respondent groups compared to pre-pandemic amounts. On average, cash stored elsewhere nearly doubled, rising from $257 to $483 (Figure 3). Those who withdrew extra cash increased their holdings by 426 percent, jumping from $178 to $937, and those who did not withdraw extra cash increased their holdings by 58 percent, rising from $275 to $436.”
Source: Federal Reserve Bank of San Francisco
Another sign of the value of cash is the fact that the survey findings conclude that people are not avoiding cash. Approximately 70% of respondents stated that they are not avoiding cash during the pandemic.
Source: Federal Reserve Bank of San Francisco
With the increase in cash holdings, both in-person and elsewhere (home, office, etc…), and the evidence that people are not avoiding cash, even during the pandemic, these results lend themselves to the idea that in times of uncertainty cash on hand can be a balm to financial anxiety.
