A recent survey of 10,000 people by Hargreaves Lansdown found that most Brits would put a £1k windfall towards basic expenses. In fact, one in ten would use the money to simply keep their heads above water rather than using the money for future financial planning.
Many Brits are struggling financially
According to Sarah Coles, personal finance analyst for Hargreaves Lansdown, one in five people would use a windfall to pay for essentials like bills or food. Another one in five would use it to pay down existing debts.
This includes 22% of women and 17% of men who would use the money to pay bills. More than a quarter of those aged 25-44 would use the money to repay debts. According to Coles, this is because a significant minority continues to struggle with the after-effects of the pandemic.
What about the rest of the population?
An impressive 32% of those surveyed would put their money into savings. Coles attributes this to people’s growing understanding of how important it is to have an emergency savings safety net to fall back on when times are tough.
If the pandemic has taught us anything, it’s that putting money away is more important than splurging on a treat – which only 10% of those surveyed would do. As Coles explains, “At the moment, many of us are getting more reward from building a sense of security than we would from a shopping spree.”
While the percentage of those saving a windfall is impressive, not many would invest the money instead. Just one in 10 people said they would use an unexpected £1,000 to invest. And the number was significantly lower among women –only 5% of them would invest a windfall compared to 14% of men.
Why aren’t Brits investing more?
Research by investment platform eToro shows that 44% of Brits think investing is only for the rich. In addition, 47% think they don’t have enough money to think about investing. For people earning £30,000 or less per year, that percentage rises up to 54%.
In fact, people earning £30,000 or under are less likely than any other group to invest. They cite not understanding investments or thinking saving is more important than investing as their main reasons.
And while banks and financial advisers regularly offer high earners opportunities to invest, only 15% of those earning under £30,000 have been given the same opportunities.
How to get started investing
If you have a significant amount of debt, any extra money you can free up in your budget should go towards paying that off first. This is especially important for high-interest debt like credit cards where the minimum payments don’t go very far.
And while windfalls are a great way to start investing, you can get going even if you only have £100 a month to put into the market. In fact, investing platforms often don’t have minimums for investments, so you could start with as little as £20 if that’s all you can spare.
Investing requires some research, as there are different ways to get your money to work for you. It’s also important to remember that past performance is not an indication of future results, and you may get out less than you put in.
You can invest tax-free through ISAs, or you can open an account to buy stocks and shares. Either way, there’s no need to wait until you have ‘enough money’ to do it. You can start with little and then grow your investments as your income grows.