Money greases the wheels of our consumerist society. Without this continual flow of finance the economy contracts and many people lose their livelihoods, especially in retail.
It is completely natural, and prudent, to want to save in periods of uncertainty. Talk of entering the worst recession for over 300 years would make even the most optimistic of people think twice about a big purchase or being frivolous with their cash.
COVID 19 has been a tale of two working economies; those, generally, white collar workers working from home, whose wages weren’t affected, saving money on travel and lunches, and those reliant on these workers being made redundant or having their hours reduced. Many workers on furlough have been in an economic form of limbo, and while they have not seen most of their income disappear, this is quickly coming to an end and some will be made redundant. Many of these jobs will not be deemed ‘viable’ in the short term.
Left - Results of website loveMONEY poll
A small poll by the website loveMONEY, in June, found readers say their finances have actually improved under lockdown. A remarkable 23% said they were significantly better off, while the biggest amount, 36%, said things had improved slightly.
At the other end of the scale, 13%, more than one in eight, reported that their finances had been hammered since the lockdown came into effect, while a similar percentage (14%) said they were slightly worse off. Finally, 14% of respondents said their bank balance looked largely the same at the end of each month.
The vast majority of people spent less during lockdown because they had less things to spend money on and most not leaving the house.
According to a study by AA Financial Services, 85% of UK adults spent less during lockdown. The average Brit saved (per month) £49 a month on petrol, £57 by not going to pubs or restaurants, £53 by not going to shops, and significant savings in other areas, totalling £617 a month on average for those still receiving their full income.
The report also found that 31% of people with savings accounts had increased their monthly deposits since the start of lockdown. This was confirmed by Bank of England data, which found that personal bank deposits had grown by three times the recent average. The Bank revealed that consumer debt was down by £7.4 billion, to just half the level seen in February. Those who are benefiting from excess income are in many cases using their spare money to pay down debts, while choosing not to take out new loans due to increased uncertainty.
According to Aviva, women seem to have been affected more strongly with 38% of women vs 29% of men saying they have less money to spare at the end of the month than they did pre-lockdown. This could be due to the types of jobs women do, like part time and in customer-facing roles.
Young adults have also been hit hard. Almost a third of 25- to 34-year-olds (32%) are concerned about their ability to save. This age group is also the most worried about losing their job due the impact of COVID-19 (28%).
Aviva Head of Savings and Retirement Alistair McQueen says: “Female savers look to have been disproportionately affected during the lockdown, as workers in sectors like hospitality and retail are more likely to be younger females. Younger people across the board also face a significant challenge. Those under 34 typically struggle to save under normal circumstances, but the current conditions have exacerbated this. For example, this age group typically spends a greater proportion of their budget on housing, and bills, which remains unchanged.”
In August, there was a big government push to get white collar workers back to the office. Then a recent u-turn, telling people to work from home again with positive COVID 19 cases rising. Many commuters don’t want to go back to that lifestyle and it’s easy to understand why.
DJ Sinfield @BigSino on Twitter said, “I am WORKING from home. I am saving £500+ a month and getting an extra 3 hours a day family time. This money and time is being spent at farm shops, local butchers etc and not Southeastern Trains. Why would I want to go back to commuting? Why?”
John Bye @_johnbye said, “The fact is many of us have enjoyed working from home, and companies have realised they're wasting money on big offices they don't really need. I save £300 a month and 2.5 hours a day by not commuting. Why would I want to go back to a London office full time?” and Paul Chapman @Paul_C-Chapman said, “I am saving around £30/day on rail fares and food, I have 3 hours/day of my life back, I have a much better work/life balance and my health is better. Why on earth would I want to go back to daily commuting?”
With interest rates dropping like a stone for savings, for example, the government backed NS&I just reduced its ‘Income Bond’ from a paltry 1.16% to an almost zero 0.01%, the incentive to save has been reduced. What we need is people to spend our way into a U shaped recovery. We need the people, on the positive side of the COVID recession, with this additional monthly money, to spend it.
This is a call to arms for work-from-homers to spend. It’s not about people spend their savings, it is also not about people spending more money than they would usually, it’s about those with this worker windfall - what they would have otherwise have spent on lunch and travel etc.- to inject that into the economy. It’s tempting to save it, but it’s money they wouldn’t have had on a monthly basis.
Put it into retail and services worth supporting, and retailers and brands they don’t want to see disappear and are rewarded with their custom. This isn’t about lazily rewarding shops or travel companies that aren’t very good or really are past their peak, it’s about supporting new or established businesses which resonate with you and make or provide great services or products.
It could be ethical or green products or services. It could be new business, crowd funding and start-ups. Look at it like an investment in the future you want to see. It’s time to put this bonus money to good use.
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