Lockdown – at least in its strictest form – is finally over.
Pubs and restaurants with outdoor spaces are up and running, gyms have opened their doors to new and old fitness fanatics and a non-essential – albeit socially distanced – weekend shopping trip is back on the agenda.
Now the most stringent of rules have eased, attention will inevitably turn to what comes next?
Part of that is the UK’s economic recovery, and, assuming the vaccine rollout continues to be successful and no new pesky variants show up and put a dent in the progress, how quickly can the UK return to roughly where it was pre-pandemic?
The good news is plenty of economists reckon it’s a relatively straight forward path to recovery – that’s the “v-shaped recovery” you’ve been hearing all about – and part of the reason for that is pent up household savings.
On average, UK adults have saved £1,744 in net day-to-day outgoings since March 2020, according to research by Fidelity, and it’s no secret that the government would like those adults to assist the UK’s recovery by spending their way out of this mess.
I’m usually one to argue the best way forward is to roll up our collective sleeves and muck in together to solve a problem, but the idea of splashing cash on things we don’t need for the sake of the “greater good” isn’t one that sits well with me.
Look, there’s clearly a need to venture out into the world, and, for the sake of our sanity and our economy, buy a few pints in the local pub, a dinner at a restaurant, and so on. But encouraging people to spend their savings on short-term highs like new clothes has never been considered a sensible idea, and while finances in many households are still precarious, it feels particularly silly to abandon that sound advice now.
Having a nest egg, even a small one, means people can start investing, they could put that money towards retirement, if they’re young they could put it in a Lifetime ISA. They could even keep the cash as an emergency fund, giving them a greater sense of financial stability and easing the stress that comes with living month-to-month without savings.
A government should encourage financial sensibility – finally, those without savings have some! This can only be a good thing.
Within the research, Fidelity also included stats on how much savers could make over the medium to long-term if they were to invest the money saved in lockdown. For example, the average person has saved £439 on eating out at restaurants since March 2020, if they were to save that amount of money each year – assuming 5% growth with a platform service fee of 0.35% and an annual management charge at 0.75% – that little nest egg would be worth £13,188 in 20 years.
Fortunately, my fears that the nation becomes indebted after 20 days and 20 nights of ‘drinking out to help out’ could be overblown.
More than half (56%) of households who saved money this year are likely to keep it in savings or a rainy day fund, and a third (33%) plan to not touch a penny of their lockdown savings, separate research by Compare the Market found.
There’s also plenty of evidence households are making sound financial choices.
More than half (55%) of UK households have now looked to save money on household bills and subscriptions, nearly a third (29%) have changed a household bill provider to get a cheaper deal, and 34% have switched their regular food shop to a cheaper supermarket.
The research also suggested some spending habits are set to change in the long term after restrictions lift, with many households choosing to continue some aspects of their lockdown lifestyle that reduced outgoings. These changes in behaviour could save households significant sums every month and are exactly the sort of choices that should be encouraged, unlike fritting away lockdown savings.