New savings habits are here to stay

More than a third (36%) of Brits plan to maintain new saving habits adopted since the arrival of Covid-19, according to the latest research by Aviva¹ into changing attitudes and behaviours towards household finances.

Aviva’s findings look at the impact of lockdown restrictions and pressure on personal finances during the coronavirus pandemic. It shows nearly two-thirds of people (64%) have become more of a saver, while 36% have become more of a spender.

Changing attitudes toward saving have been partly driven by temporary shutdowns of the leisure, hospitality and retail sectors limiting recreational spending opportunities, which has left some households with spare disposable income. The trend is also likely to be influenced by people seeking to build a savings buffer to guard against the economic downturn.

The research highlights those over the age of 45 are more likely to maintain new savings habits (41%) than people under the age of 45 (31%). Continuing with new savings habits rises to 45% among those aged 55-64, while falling to just over a quarter (28%) in the 25-34 age group.

Bank of England data points to the scale of Britain’s savings spree since the arrival of Covid-19. Household cash savings increased by £76bn between March and July 2020², matching the total increase over the previous 16 months. Consumers also repaid five years of credit card debt during the lockdown period, causing borrowing to drop to a level last seen in 2015³.

However, consumer credit borrowing increased by £1.2bn² in July alone – the first rise for five months – as the economy began to reopen.

Despite this, Aviva’s research reveals many adults plan to make permanent or long-term spending reductions to save more in future. The most common areas people intend to reduce their outgoings are eating out (32%), entertainment, recreation or holidays (25%) and personal goods (22%).

With typically less discretionary spending, those under the age of 45 are more likely than the UK average to seek to cut back on food, alcohol consumption and leisure goods⁴.

The ability to access money is individuals’ biggest priority when deciding where to place any savings or investments in the current climate (33%), suggesting that savers are taking a more cautious and flexible approach to saving. Only 14% of people are prioritising achieving the biggest return for their savings, compared with 20% whose biggest priority is to take the lowest risk. Those aged 55-64 are the least bullish, with only 11% saying that achieving the biggest return is their most important priority.

Ensuring savers are engaged with their personal finances and understand how to make sure their savings are working as hard as possible is crucial to making sure their money is protected from the downturn and potential future inflation rises caused by the pandemic.

Alistair McQueen, Head of Savings and Retirement at Aviva, comments: “This research reveals one silver lining that has emerged since the arrival of Covid-19 - consumers are signalling strong intentions to maintain healthier savings habits adopted during the initial lockdown period.

"It’s more important than ever that households have as much visibility over their finances as possible to help them weather further shocks caused by the pandemic. Yet, many do not, or cannot, access regulated financial advice. This means large swathes of the UK are acting alone in planning their financial future.

“We all have a role to play in tackling the resulting guidance gap. For example, at Aviva, we have introduced Mid-Life MOTs for our employees to ensure they feel supported when planning for their financial future.

“We also need to provide support for households under the more severe financial strain. Although some groups have saved more during the pandemic, many low-income households may not have been able to add to their savings during lockdown. Discretionary spending among these households was low even before the pandemic, meaning opportunities to cut expenditure and increase their savings are restricted. Making financial guidance accessible to all households will help more people in the UK to achieve financial security.”

Aviva’s top tips for improving saving habits include:

1. Understand where you start – Before considering your plans for tomorrow, it’s important to understand where you stand today. Look at your current savings and consider where you want them to be in one, three- and six-months’ time.
2. Set clear and achievable goals – Be realistic. Review your income and expenditure levels for each of the last six months to get an idea of your current spending habits. Then set incremental changes each month to ensure you begin to save more without negatively impacting your living standards
3. Take advantage of online planning tools – Using the Money Advice Services’ savings tool can give you an idea of how much of your income you’ll need to put aside each month to achieve your goals
4. Understand your current savings and projected retirement fund - Identifying how much your exact level of current savings and monthly saving contributions will leave you with in retirement can help you adapt your long-term financial goals. Visit the Aviva website to access our retirement planner
5. Take control on your own or with the help of a financial adviser - If you are able to, accessing regulated financial advice will provide you with expert guidance to confidently plan your financial future.

-ENDS-

Research methodology:

¹Research of 2,000 UK consumers conducted on behalf of Aviva by Censuswide, August 2020. Censuswide is a member of ESOMAR- a global association and voice of the data, research and insights industry. Censuswide comply with the MRS code of conduct based on the ESOMAR principles.

² https://www.bankofengland.co.uk/statistics/tables - Table A4.1

³https://www.bankofengland.co.uk/statistics/tables - Table A5.6

⁴https://www.ons.gov.uk/peoplepopulationandcommunity/personal-andhouseholdfinances/expenditure/articles/morethanonefifthofus-ualhouseholdspendinghasbeenlargelypreventedduringlock-down/2020-06-11

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