More than a third of Brits plan to maintain new saving habits adopted since the arrival of Covid-19
More than a third (36 per cent) of Brits plan to maintain new saving habits adopted since the arrival of Covid-19, according to the latest research by Aviva into changing attitudes and behaviours towards household finances.
Aviva’s findings look at the impact of lockdown restrictions and pressure on personal finances during the coronavirus pandemic. It shows nearly two-thirds of people (64 per cent) have become more of a saver, while 36 per cent have become more of a spender.
Changing attitudes toward saving have been partly driven by temporary shutdowns of the leisure, hospitality and retail sectors limiting recreational spending opportunities, which has left some households with spare disposable income. The trend is also likely to be influenced by people seeking to build a savings buffer to guard against the economic downturn.
The research highlights those over the age of 45 are more likely to maintain new savings habits (41 per cent) than people under the age of 45 (31 per cent). Continuing with new savings habits rises to 45 per cent among those aged 55-64, while falling to just over a quarter (28 per cent) in the 25-34 age group.
Bank of England data points to the scale of Britain’s savings spree since the arrival of Covid-19. Household cash savings increased by GBP76bn between March and July 20202, matching the total increase over the previous 16 months. Consumers also repaid five years of credit card debt during the lockdown period, causing borrowing to drop to a level last seen in 20153.
However, consumer credit borrowing increased by GBP1.2 billion in July alone – the first rise for five months – as the economy began to reopen.
Despite this, Aviva’s research reveals many adults plan to make permanent or long-term spending reductions to save more in future. The most common areas people intend to reduce their outgoings are eating out (32 per cent), entertainment, recreation or holidays (25 per cent) and personal goods (22 per cent).
With typically less discretionary spending, those under the age of 45 are more likely than the UK average to seek to cut back on food, alcohol consumption and leisure goods4.
The ability to access money is individuals’ biggest priority when deciding where to place any savings or investments in the current climate (33 per cent), suggesting that savers are taking a more cautious and flexible approach to saving. Only 14 per cent of people are prioritising achieving the biggest return for their savings, compared with 20 per cent whose biggest priority is to take the lowest risk. Those aged 55-64 are the least bullish, with only 11 per cent saying that achieving the biggest return is their most important priority.
Ensuring savers are engaged with their personal finances and understand how to make sure their savings are working as hard as possible is crucial to making sure their money is protected from the downturn and potential future inflation rises caused by the pandemic.
Alistair McQueen, Head of Savings and Retirement at Aviva, comments: “This research reveals one silver lining that has emerged since the arrival of Covid-19 - consumers are signalling strong intentions to maintain healthier savings habits adopted during the initial lockdown period.
“Greater appreciation for saving is a crucial first step to ensuring more people understand how to plan their future effectively to achieve financial security. It’s more important than ever that households have as much visibility over their finances as possible to help them weather further shocks caused by the pandemic. Yet, many do not, or cannot, access regulated financial advice. This means large swathes of the UK are acting alone in planning their financial future.
“We all have a role to play in tackling the resulting guidance gap. For example, at Aviva, we have introduced Mid-Life MOTs for our employees to ensure they feel supported when planning for their financial future.
“We also need to provide support for households under the more severe financial strain. Although some groups have saved more during the pandemic, many low-income households may not have been able to add to their savings during lockdown. Discretionary spending among these households was low even before the pandemic, meaning opportunities to cut expenditure and increase their savings are restricted. Making financial guidance accessible to all households will help more people in the UK to achieve financial security.”