Facing the future: family finances in the ‘new normal’
Traditional spending and saving habits have been turned upside down

 04 September 2020
Facing the future: family finances in the ‘new normal’

Household finances, including spending and saving patterns, have changed radically since the coronavirus (COVID-19) lockdown.

  • Traditional financial habits have been turned upside down. Household budgets as the heart of our incomings and outgoings before the pandemic are no longer working.
  • The unprecedented Government schemes to support employers and the self-employed are winding down, leading to uncertainty about job security.
  • Regular Government U-turns on policies haven’t helped either.

 

A crises of financial confidence?

It’s all a bit worrying for many of us. A recent analysis of consumer confidence alongside official household spending data[1] reveals the inability to save is the biggest current concern for UK adults (26%). This is hardly surprising, as earnings have been disrupted for millions of workers.

UK adults also cited economic and stock market volatility reducing the value of their pension or investments to be a key concern (23%), as well as an inability to pay household bills (19%).

 

What we spent our money on during lockdown

Spending on non-essential items fell as a result of government instructions to stay at home. This meant that typical UK households were spending 29% less per week in total during lockdown compared with ‘normal’ times.

Equally, there was increased spending on items such tea, coffee, chocolate (of course!) and energy consumption to fuel the kettle, computers, TVs and (at times) cooling fans. There was a surge in subscriptions for services such as Netflix, which grew its subscriber base by a massive 15million between mid March and the end of April 2020 alone [5] . These services along add around 6% to the average household’s weekly spending. Not to mention any additional mobile phone data charges from Zoom calls and uploading videos. 

 

Reduced or zero spending

Any increase in expenditure will have been partially balanced out by reduced or zero spending on leisure pursuits. Not going  on holidays, not eating out, not buying clothing, or going to the hairdressers and the cinema, theatre and museums, will have potentially reduced the typical household’s average weekly spending by 35%. Overall, this creates a net saving of 29%[2].

Those who took advantage of the  “Eat out to help ou t” scheme that ran during August would have saved considerably over their ‘normal’ restaurant expenditure. The average saving per person was around £6, according to Sky News. The numbers of meals are impressive too:

“People in the City of London and Westminster, the area with the highest number of participating restaurants (1,498), got through a whopping 849,000 meals and enjoyed a total discount of £6,058,000.

  • Bristol North West had the highest number of meal claims (3,245) per restaurant.
  • Birmingham Hall Green had the highest amount of money claimed back by each restaurant.
  • Rayleigh and Wickford in Essex had the highest discount of all the constituencies (with) an average saving of £8.22 per meal. " [7]

 

Increased online spending

What the study doesn’t seem to take into consideration is increased online spending, which rose considerably and according to an article in Forbes, is still rising. [6] A US survey found that:

“Nearly 36% of U.S. consumers are now buying retail goods online, compared to 29% doing so in mid-April when most brick-and-mortar stores were closed…. The average (US) consumer doesn’t expect the pandemic to end until February 2021, meaning that retailers have at least eight months of increased online orders."

 

Saving and spending across the UK

There have also been major differences across the country as household saving and spending patterns alter.

  • People living in London feel the inability to save is their biggest current concern (30% as opposed to a UK average of 26%).
  • Almost half of all Londoners lack confidence in their own financial situation at the moment (48% as opposed to a UK average of 38%).

When asked whether they have more or less money to spare at the end of the month than before lockdown, adults living in Plymouth were most likely to be ‘lockdown savers’ while those in Brighton were most likely to report ‘lockdown losses’. 

 

Navigating unforeseen circumstances

If you feel your finances have been drifting, it’s time to grasp the helm and set a new course. You are not alone. Many households continue to navigate through unforeseen circumstances. Keep your saving and spending habits under careful and regular review. Weigh up what you are spending each month, and how much more (or less) you are saving.

 

Give your cash a good home

If you feel as if you have more cash to spare at the end of the month during this time, it’s important to consider a good home for it. Maintaining or even increasing pension contributions could be an attractive longer-term option for savers who can afford to do so. This ensures that money you would otherwise have paid in tax on your earnings goes straight into your pension pot via tax relief. Providing you can access other funds at short notice if you need them, then small extra savings today could make a big difference tomorrow.

 

Help with managing your wealth

At Panthera Wealth, we want your money to work for you, not the other way around. Our goal is to help you plan for the lifestyle you want in the ‘new normal’, and for you to know how much you’ll need to achieve that. Call us to book an initial no-obligation online appointment, to discuss how you can live the lifestyle you want without the fear of running out of money.

 

 

 

 

 

 

SOURCES

[1] Research of 2,020 UK adults conducted on behalf of Aviva by Censuswide, 7–11 May 2020. All figures featured in this release refers to this dataset, unless otherwise stated.

[2] The 35% saving, coupled with the 6% of additional expenditure, creates a potential 29% overall saving in households’ typical expenditure each week.

[3] www.ifs.org.uk/publications/14791

[5] https://www.theverge.com/2020/4/21/21229587/netflix-earnings-coronavirus-pandemic-streaming-entertainment

[6] https://www.forbes.com/sites/blakemorgan/2020/07/27/more-customers-are-shopping-online-now-than-at-height-of-pandemic-fueling-need-for-digital-transformation/

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