During the height of the lockdown between April and June in 2020, households managed to save a whopping £54.6 billion in three months and squirrelled away 29.1% of their disposable income, which is more than double the previous record. Households were prevented from spending hundreds of pounds a month, while others battened down the hatches due to concerns about losing jobs. This left the Bank of England to forecast that the UK would save a record 15% of their disposable income in 2020.*
This is a huge achievement but does not take away from the fact that millions of people have faced particular hardships over the past year due to redundancies, furlough and reduced hours. Sadly, there are still huge inequalities with those in the retail, tourism and hospitality sectors bearing the brunt.
With no bars or clubs, hotels or hairdressers open to spend money in, outgoings decreased considerably for many. Not to mention the transport and petrol savings from not having the daily commute.
The green shoots of a life after lockdown are emerging, now that a vaccination is being rolled out and we can see a path out of lockdown, people are naturally making plans for the future.
Experts predict a surge in spending once life begins to return back to normal. We are left wondering what our spending vs saving could look like once lockdown restrictions are eased. Will such savings habits become short-lived?
The temptation to spend once this is all over is strong, no matter your current situation. We want to get out and about, whether it's spending on experiences with our loved ones like holidays, drinks and meals out, or spending on physical items like clothing, new technology and hair cuts (let’s face it, this is not a choice, the majority of us are in dire need of one of those!).
After all, a spending surge will be good for local business and the economy. But equally, if we have acquired good saving habits over the past few months, how do we keep up this momentum?
An effective practice is to look at your bank statement from 18 months ago, the daily transactions and what your money was spent on. It is expected that post-lockdown spending will increase but there are bound to be areas that we are willing to keep our cutbacks. These could be buying fewer coffees, leaving an extra month between trips to the hairdressers or working from home another day per week to save transport costs. Even if we haven’t managed to save a ‘surplus’, for some it has made us realise that we can actually get by with a little less consumption.
Some employees have been lucky enough to pay off debts and even begin to save extra money every month. By maintaining good habits out of lockdown, this can be part of the new ‘normal’ moving forwards.
For those who are managing to save extra, there are many options – once they have built up an ‘emergency fund’, it’s time to think about increasing pension contributions and saving into an ISA. However, all of these options can at times be overwhelming and a lot to navigate, this is where HR can help.
Better financial wellbeing in the workforce has no end of benefits, enabling employees to feel less stressed and more in control. With 77% of employees saying that money worries are affecting their work, this is a chance for employers to step up and provide their employees with the right tools to look after their financial wellbeing.
We service our cars every year, but why not our finances too? MyEva is a digital financial expert which you can make available as a benefit to your employees. It takes your employees through a financial health check to understand their current circumstances and then gives simple recommendations to help improve their situation. Goals could include building up an emergency savings pot, making sure the family is protected, paying off debt, and saving into a pension.