Will Covid-19 change savings habits for good?

Before 2020, the word ‘furlough’ probably didn’t signify much to most people. Yet, with upwards of 9.6 million UK employees having been furloughed at some point in the last 6 months, the term has real meaning to many now.

The lockdowns, designed to halt the virus’s spread, have clearly disrupted the livelihoods of many, with some experiencing a reduction in income while others are facing redundancy. For those so affected, this may well be the rainy day that they’ve been saving for.

Time spent at home has been an opportunity, for some, to take stock and re-evaluate priorities. It’s interesting to see that, in the first few months of the lockdown, many took the decision to improve their personal finances by paying back debt. It’s been estimated that £7.4 billion of consumer credit was repaid during the first month of full lockdown restrictions. More recent data, however, has shown the grim reality of curtailed income as more consumers used credit cards and overdrafts to cover living costs.

Despite Covid-19, people still have long-term aspirations and dreams, and these won’t become reality without thorough long-term planning. Setting aside money is never easy, but assigning an affordable portion of income to saving might be a good way to make the process as pain-free as possible.

If the situation was not difficult enough, the current level of interest rates for savers, at historic low levels, is an added disincentive to save. Although salting something away for the future is undoubtedly a positive, the effect of inflation over the long-term tends to eat away at the spending power of savings. Inflation hasn’t been a worry for some time, but we think its corrosive power might reappear; follow the links below to find out more. And if you’re thinking about investing for the future, flick through some other articles on our Blog or visit our Learning Hub.

Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations.

Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.2