The pandemic has clearly changed the way consumers are spending and saving. GfK, a provider of data and analytics to the consumer goods industry, conducted a survey of the British public to find out how they feel about the economy and their personal financial situations. The results indicate that many Brits are spending less and saving more. Is this for the best?
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How has the pandemic changed the way Brits are spending?
Strict lockdown restrictions made it difficult for Brits to spend money. Air travel was suspended and high street shops and restaurants were closed. And since people spent most of their time at home, most were able to save more.
When restrictions lifted, consumer spending increased by 0.4% in April 2021, and by July 2021, it had risen by 11%. The entertainment industry saw a growth of 8.1% as Brits rushed to the cinema, theatre and sporting events. Likewise, the hospitality industry saw a 30.5% growth as Brits rushed back to pubs and restaurants.
However, in August 2021, spending started to slow down, and Brits increasingly reverted to lockdown saving habits.
Ed Fleming, managing director at Savoo comments, “For some, spending on bigger items has taken a backseat as the uncertainty over changing rules has meant that many people are unsure about booking things for the future, such as overseas holidays.
“Changing attitudes and behaviours towards personal finance have largely been influenced by people looking to protect themselves from a change in the economy.
“Consumers have built new saving habits over the pandemic and as the world continues in the new normality, it’s clear that the British public has built some traits that are here to stay.”
Why is saving more important than spending?
Spending is inevitable, but it can be done wisely. Undoubtedly, the pandemic placed many families in financial and emotional distress due to job uncertainty and reduced wages while on furlough. And had many families saved enough, the financial stress would not have been so severe.
Here are some of the crucial reasons why spending less and saving more should be here to stay:
- Financial problems can be a burden, and an ideal remedy is building an emergency fund by saving.
- Saving allows you to invest, helping you build wealth and spend more comfortably in the future.
- Saving is also one of the crucial elements of building a financial safety net and attaining financial security.
How much money is a person recommended to have in savings?
There’s no specific amount you should aim to have in savings. This is simply because how much you can afford to save – and how much you need to save – will depend on your lifestyle and your financial needs.
That said, a rule of thumb is to try and save around three to six months’ worth of expenses. Naturally, this may be a long-term aim, but building a regular saving habit makes it possible. Simply put, the more you save, the more secure your finances will be and the more you’ll have to invest.
It’s also wise to compare different savings accounts to get the most out of your savings.