A new study into the nation’s finances has shown that a fifth (20%) of Brits believe Coronavirus has been a financial wakeup call, with almost a third (30%) admitting they were unprepared money-wise for the situation.
The research, conducted to mark the launch of Zopa’s bank, shows 38% of people are now likely to create a reserve savings pot, in anticipation of another crisis. This comes as little surprise considering over two-thirds (68%) believe they will witness a lockdown again.
Defying their stereotype as carefree spenders, it is millennials that are leading the way when it comes to overhauling their savings habits – those aged 24 to 39 are twice as likely to start putting money aside now for unexpected events than those aged over 55 (50% vs 23%). Longer term, millennials also plan to save the most; aiming to have an average of £21,567 by 2025, compared to £18,953 saved by those aged over-55 and a national average of £20,676.
Shorter term, the average Brit has a savings goal of £6,697 by the end of this year to create a buffer for the future. However, with 51% admitting they are financially worse off since the pandemic, 13% have a savings goal to simply get back to where they were before the crisis hit, with the average estimated time to do so 11 months.
Brits aren’t just saving for another possible pandemic – a fifth (20%) admit they are also saving now with the expectation that prices are going to rise later this year and into 2021. Topping the list of items consumers expect to see increase in price are flights (56%), holidays (53%) and eating out (53%). 16% also plan to save extra this year in order to go on bigger holidays in 2021, making up for the lack of them in 2020.
To help people start to save, Zopa’s first product launch as a bank will be the Zopa Fixed Term Savings Account. This will offer a competitive fixed rate over 1-5 years, at a time when rates are at a historic low. Accounts will be available to all UK savers in the coming months and can be opened in only seven minutes online. The savings account will be followed by an innovative credit card launching later in the year which will give customers more control over their spending.
As consumers evaluate their spending, it seems that the pandemic has driven a more socially responsible approach to where people want to spend, with 62% willing to spend a little more at independent businesses post-Coronavirus, if it helps their recovery. In fact, the average person would spend £1.40 more on a pint and £1.60 more on a coffee at an independent business, if it would help the business to survive.
As the ‘Feelgood Money’ company, Zopa’s research also highlights the current appetite for people to make their financial choices contribute positively to recovery. 28% of restaurant goers say they will increase the amount they tip, having watched the impact this lockdown has had on the income of those in hospitality, and a quarter of Brits (24%) plan to give more money to charity.
People are also focusing more on what really drives that feel good feeling. After the enforced separation of the lockdown more than half (60%) agree that they would sacrifice the amount of birthday and Christmas gifts they received if it meant being able to spend these special occasions with loved ones.
Clare Gambardella, Zopa’s chief customer officer, commented: “The last few months have really put the nation’s finances under a microscope and forced many people to re-look at how they save and spend. Encouragingly, we can see that where possible, people are using this time to put in place good financial habits – particularly the younger millennial audience, which might surprise some.
“At Zopa, we are launching our bank at a time when customers need products and services that can help them towards these financial goals. With 15 years’ experience in providing simple, fair products and award winning levels of customer service to over half a million customers, we look forward to offering more products to more people through our bank.”
To mark the launch of Zopa’s bank, it has partnered with money expert Jasmine Birtles, to offer tips on how to financially prepare for a post-Coronavirus world:
- Create a reserve savings pot. It doesn’t matter whether you’re in full time employment, self-employed or freelance, everyone needs an emergency pot of cash that you can use to pay your bills if you suddenly don’t have an income. Keep the money in an easy-access account, separate from your other savings, which you don’t touch unless there’s an emergency. Ideally you should have enough money in there to cover your living expenses for six months, but if that’s too much to aim for, try to accumulate at least three months’ worth.
- Learn from the lockdown. Most of us spent a lot less than we usually do during the lockdown, and yet we survived! What does that tell us about how much we really need to spend as opposed to what we just get used to shelling-out? Try to keep some of those frugal habits going such as eating more at home, buying fewer clothes and making your own teas and coffees through the day, and then save and invest what’s left over each month.
- Look out for business opportunities. The news is full of dire predictions about the economy, but there are always opportunities in any situation and that means that there could be a new way to make money just around the corner waiting for you. Be open to new possibilities of a side-hustle or even a whole new career – particularly if you’re facing redundancy or worried about the future of your industry.
- Keep the close ties.One fantastic aspect of the lockdown was the neighbourliness and willingness to help that was shown by so many, even to complete strangers. We must make sure we don’t lose that community spirit as we go back to ‘normal’. Save money and have a happy neighbourhood by swapping and sharing food and food delivery slots, lifts, power tools and more with your neighbours, friends and family. The more we can share, the more we will all have in the long run.
- Get to grips with your credit score.Use a credit-checking tool such as Zopa’s ‘Borrowing Power’ to see how likely it is that you can get a loan. This tool shows you a full overview of your credit health, including your credit score and gives you simple, actionable tips that can help you improve your rate of borrowing. If you do it now it will help you ensure you’re in the best possible financial position to take out a loan or credit card in the future.
Jasmine Birtles, money expert, added: “There’s no question that getting your finances in order can feel daunting, especially considering that many Brits were unprepared financially for the crisis. However, the situation has been a catalyst for many to review their saving habits, meaning that new bank Zopa is launching at a time when consumers need financial service providers to work on their behalf and equip them with the tools they need to get the most from their money.
“It’s important to remember that even small manageable steps can make a big difference to your finances in the long run – from creating a small savings pot over a period of time or teaming up with friends and neighbours to save on petrol and food delivery prices. The most important thing is to know that you’re not alone and there are a wealth of resources available to empower you to set up good financial habits for the future.”