The first lockdown seems to have driven home the importance of personal financial responsibility and turned the UK into a nation of super savers. That’s according to data from finance firm Plum, where deposits by savers increased five-fold during the first lockdown. So, can we expect the same during lockdown 2?
Brits saved a lot during the first lockdown
The first lockdown undoubtedly brought savings into sharp focus. A combination of financial fear and reduced spending because of lockdown measures made Brits more keen than ever to save their money.
Many realised the importance of having a financial safety net, with research from Aviva showing that nearly two-thirds of people became more savvy about saving during the lockdown period.
This is very different to the situation before the pandemic. For example, a study found that that 50% of Brits did not have any savings pre-pandemic.
Commenting on the increased number of deposits at the firm, Plum’s CEO and co-founder Victor Trokoudes said:
“When spending dropped during lockdown, we immediately saw deposits into Plum grow. People are taking a closer look at their finances and want to make sure they are covered in the future. While we can’t predict exactly what lies ahead as the global pandemic continues, we do know that financial resilience will be critical for everyone.”
The big question now is whether the saving culture created by lockdown 1 will continue into lockdown 2.
Will people continue saving during lockdown 2?
Lockdown 1 clearly induced saving habits among many of us. But what about lockdown 2? Are people likely to continue saving?
Well, according to Aviva, more than a third (36%) of Brits plan to maintain new saving habits adopted since the arrival of Covid-19. Although this study was conducted before the current lockdown, these findings should still apply.
Aviva states that the saving trend is due to consumers seeking to build a savings buffer to guard against the economic downturn.
And since the economy is still not out of the woods yet, savvy investors are likely to continue saving in preparation for whatever lies ahead.
Which areas have people been spending less money in?
The majority of savings in the pandemic period are attributable to a fall in non-essential spending in many UK households.
For example, during the first lockdown, Aviva found significantly less spending on things like eating out, new clothing, holidays, trips to the theatre and cinema, hairdressing and beauty services.
With lockdown 2 measures that include government advice to stay at home and the closure of non-essential shops, we can expect less spending on non-discretionary items and more saving, just like in lockdown 1.
What’s the value of saving during lockdown 2?
The onset of coronavirus and the first lockdown caught many of us unaware. But if there’s one thing we have learnt from the situation, it’s the importance of financial preparedness. While we cannot predict the future, one way we can feel a bit more in control is by saving money.
A savings nest egg can help us feel a little less anxious about the future. We can relax knowing that should the unexpected happen, we can easily deal with it.
And right now, during lockdown 2, when most places are shut down to protect us from coronavirus, we have an excellent opportunity to develop good money habits that can last us for a lifetime.
For example, instead of going out to eat, you could start meal prepping. Rather than shopping out of boredom, you could listen to an audiobook. Habits like these will all save you money.
As for where to put your savings, that’s completely up to you.
You could put the money into a current account. Or you could put it an easy access savings account that offers the combination of a higher interest rate and easy access to your cash when you need it.
The most important thing is to have something saved up for a rainy day.
Of course, a little distraction now and then is crucial for our mental health. So don’t feel guilty about spending a little money to treat yourself every so often.
Personally, my strategy has been to save as much as I can while still allowing myself the occasional treat like a fancy dinner with my family.
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