Britain’s attitude towards saving appears to have been given a shot in the arm as a major study1 reveals lockdown has enabled many to put money away while encouraging others to save more in future.
According to the research, under lockdown, almost two fifths of Brits (37%) have saved more into a savings account than they would usually, a figure which rises to 45 per cent of younger generations, those aged 18-34. Only 16% noted that they had saved less since lockdown began on 23rd March. However, there remains an element of regret for many, with more than a third (36%) wishing they’d saved more before the pandemic hit.
Savings were consistent across UK regions, with those in Yorkshire (42%) most likely to have saved more since social distancing measures were introduced and those in the South East and South West (36% respectively) the least likely to have saved more.
Nationwide Building Society’s latest Savings Index is a tracked study of savers that uses customer data and a poll of more than 10,000 people across Great Britain to understand the nation’s savings habits, sentiment and confidence. It forms part of the Society’s PayDay SaveDay campaign, which encourages people to save the day they get paid to build a financial buffer – there are currently 11.5 million people in the UK2 with less than £100 in savings.
Although many have saved more, others haven’t been so fortunate. In total, 15 per cent have had to dip into their savings as a direct result of Covid-19 and this jumps to more than a quarter (27%) of those unemployed. However, 39 per cent of those who have used their (or their children’s) savings say it’ll take longer than six months to recoup the money they have spent.
The Index highlights that the impact of the pandemic weighs heavily on the nation’s mind. When it comes to the two major challenges facing the UK – Covid-19 and Brexit – two thirds (65%) think the pandemic is more concerning for their personal finances, while more than a fifth (21%) believe Brexit is the bigger threat.
The Index also points towards people preferring not to touch their savings where possible at this time. According to Nationwide customer data, nine in ten (90%) of the Society’s members3 did not withdraw any money from their savings accounts between January and May this year. And month-by-month analysis below shows that as the nation entered lockdown, the Society’s members were less inclined to withdraw money from their savings.
Lockdown has changed habits:
Despite many saving more money in lockdown, more than a third (36%), according to the poll, wish they’d saved more before the pandemic, a figure which decreases with age - from 47 per cent in the 18-34 bracket to just over a fifth (22%) of those aged 55 and over. Regionally, Londoners were most likely to be dealing with hindsight savings regrets with more than two in five (41%) wishing they’d saved more. There was a clear distinction between households with and without children, as 46 per cent of those who have children in the house wished they’d saved more versus around a third (32%) without children.
When asked to think about the savings buffer people feel they would need to set aside for unexpected expenses, the average person feels they need £12,212 to feel financially comfortable should another similar pandemic hit the UK.
However, it does appear for many that savings patterns gained during lockdown will stick, with over a third (36%) saying their savings habits will change post lockdown. This feeling was particularly prevalent in younger generations, with over half (52%) of those aged 18-34 feeling that their savings habits will change post Covid-19.
Seeing young people more inclined to save can only be a good thing given that according to Nationwide’s own member data, it is younger people – across all UK regions – most likely to have less in savings than older people – a trend that emerged across the Savings Index reports. The table below also suggests a willingness to get into the savings habit amongst younger age groups as the Society’s own data shows the number of people with less than £1,000 in a Nationwide savings account has fallen across all regions between the end of September 2019 and the end of May 2020.
Percentage of Nationwide members with less than £1,000 in a Nationwide savings account by age/region as of end of May 2020 (bracketed % relates to end of September 2019):
Encouraging people to save is part of Nationwide’s core purpose, which is why the Society launched its Start to Save account in February, which continues to pay 1.00% AER/gross p.a. (variable) and offers savers the chance to win £100 through regular prize draws as long as members save between £50 and £100 for three months.
Key fact: According to Nationwide’s poll, only one in five (22%) people could correctly identify the current Bank of England Base Rate, which is a three per cent increase from our first Savings Index back in November. In addition, some appear to have missed news of the second rate cut, with 14 per cent thinking it currently stands at 0.25%.
Positive signs for the future:
On a positive note, the pandemic has led to a number of unexpected benefits. There has been a significant rise in people talking to their partner about their financial situation, with 31 per cent more open about their finances since social distancing measures came into place. Broadly speaking, Brits are optimistic about their future savings in the short (3-6 months), medium (6-24 months) and longer term (24+ months). Around four in ten (38%) felt optimistic about their savings in the short term compared to 29 per cent who didn’t. A similar pattern emerged in the medium term (38% optimistic vs 27% not optimistic) and Brits felt most confident on their savings in the long term (42% optimistic versus 23% not optimistic).
Tom Riley, Nationwide’s Director of Banking & Savings, said: “There’s no doubt that the impacts of Covid-19 have been felt across the savings market. While we’ve seen people wish they’d saved more prior to the pandemic, some are clearly trying to leave their savings alone. We’ve also seen people feeling broadly positive about savings for the future, with an increasing number opening up about their finances with their partner. Whether this is the start of a new savings culture remains to be seen, although the pandemic has certainly made us look at the need for a financial buffer for a range of reasons. Interestingly, a large portion have changed their savings habits as a direct result of the pandemic, so we may well see a shift in the nation’s savings culture over the coming months as new savings routines begin to stick.”