A surprising number of people have picked up the savings habit in recent months as lockdown has curtailed opportunities to spend. How can this unexpected nest egg be put to good use?
In some cases, the savings have been substantial, with the average household holding on to £2,879 during the 13-week lockdown. It’s not hard to see where these savings have come from: commuting costs have been slashed, holidays postponed, and spending on daily coffees, beauty treatments, restaurant trips or cinema tickets entirely curtailed.
Of course, for some people, lower spending has been offset by more serious reductions in income, be it salary cuts or redundancy. But for those able to work from home, or whose income has been supported by the government’s furlough scheme, the question is how to make the most of this temporary savings boost.
Many have used these funds to clear debts. Bank of England figures show a record £5bn of credit card debt cleared in April, significantly more than the £300m cleared in a standard month. For others it may make sense to use some of these surplus funds to boost longer-term savings, top-up pensions and add to investments. This can be done via one-off payments or by increasing regular monthly savings.
Whether you chose to reduce debt, build up a cash safety net, or boost pensions and investments, it is wise to think about where and how you have saved money during the lockdown, and whether you can make more permanent changes to your spending habits. Most of us won’t necessarily want a ‘staycation’ every summer, but cancelling unused gym memberships or cutting out the cappuccinos as we resume our old routines can help turn these ‘unintended savings’ into a more thoughtful budget that can bolster finances over the longer-term.
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