The coronavirus pandemic led almost half of all households to reduce their savings and a sixth of all households had to borrow money to deal with the economic impact of the crisis, according to a report by the Myers-JDC-Brookdale Institute.
While government grants provided only limited assistance in coping with the crisis, they did provide significant assistance to households with low income, the report found.
The study was based on an Internet survey of 1,501 Jewish households in Israel during mid-August.
Some 51% of all survey participants said they had to use extra financial resources to deal with the crisis, including reducing current savings, withdrawing money from savings, taking loans from a bank or nonbank lender, or a combination of these actions.
About 45% of all respondents said they reduced their savings due to the crisis by reducing the amount they added to savings or withdrawing funds from savings. About 25% said they withdrew money from some source of savings to deal with the crisis. Half of the 67% who said they were saving money before the crisis started said they were now saving less.
In addition, 17% of respondents said they borrowed money to deal with the crisis. Some 10% said they took loans from a financial entity such as their bank, credit card or pension fund, and 10% said they had gone into overdraft. In addition, 14% reported receiving financial help from family or friends.
Not surprisingly, workers who were furloughed or fired, and households that reported a decrease in their income, were the most likely to take out loans and withdraw savings.
Seventy-six percent of people said they received some government assistance to deal with the corona crisis during the survey period, with 21% receiving several types of government assistance.
In general, the respondents reported receiving less assistance than Finance Ministry statistics would indicate, although that phenomenon is consistent with research on government assistance programs in other countries and is likely either due to a lack of knowledge or deliberate under-reporting for a variety of reasons, the report said.
Among the self-employed who had to reduce or close their businesses during the first closure, those who received government grants were only slightly less likely to make significant reductions to their expenditures compared with respondents who did not receive these grants (34% versus 43%).
However, among the self-employed with below-average incomes whose businesses contracted or closed, 26% of those receiving the grants had to significantly reduce expenditures, compared with 56% of those who did not receive the grants. Some 26% of low-income households said the grant money was “very helpful.”
Families with children were more likely than people above retirement age to say the grants had helped them significantly.
The report concluded that policy-makers should try to ensure that households have appropriate access to savings and loans and to consider more targeted government funding for families with children as well as those who do not have access to other financial resources. These efforts should be accompanied by outreach programs that educate households about proper financial management, it said.