The ongoing global health crisis, economic downturn and uncertainty over income and job prospects over the last six months has forced 60% of people to tap into their savings to cover day-to-day bills and expenses, according to new research from Fidelity International.
For people in their 20s, this figure rises to 78%. Young people have been disproportionately hit by the pandemic’s disruption to the jobs market, with recent research from the London School of Economics (LSE) showing that one in ten of those aged 16-25 have lost their job.
Fidelity International’s research also found that while a fifth (19%) of adults needed to dip into their savings often, this was also most prevalent among those aged 20-29 years old, with a third (32%) repeatedly relying on their savings. The majority of adults spent this money on basic necessities, including food (40%), household bills (37%) and supporting family members (20%), with people spending an average of £843 from their savings over this six-month period.
Even with the Government’s support measures, four in five workers (81%) who have previously been furloughed admitted they had needed to access their savings over the past six months. More than three-quarters of those who remain furloughed continue to use their savings to support day-to-day spending.
Maike Currie, investment director at Fidelity International commented: “Months of uncertainty have left many households facing very real financial challenges, with little choice but to rely upon their savings to cover the cost of daily essentials. The disruption caused to financial routines will not only have seen them forced to sacrifice savings goals but caused significant stress and anxiety – no-one likes the idea of dipping into their emergency funds.
“If you are in the position of having to rely upon your savings, it’s important to review your overall financial position before you make any decisions. Consider the savings pots you’ve created for your goals, both short-term and long-term, and which are the most essential to your financial future. Goals such as retirement may seem a long way off, but the decisions you make now can affect your plans in the future.”
However, more than a quarter have increased the amount they save over the past six months, setting aside an average of £1,649. Again, younger adults have faced greater a financial challenge here, with those aged 18 to 24 years old saving £1,198 in lockdown. In comparison, savings gains were over £700 higher among those in their 60s, at an average of £1,909.
Maike Currie continued: “For those who have found themselves in a more fortunate position and saved money during the past few months, this could be a good opportunity to strengthen your savings. It’s worth thinking about how you use this to maximum effect for the future.
“For example, putting an extra 1% of your monthly salary into your workplace pension each month can make a real difference in the income you’ll have in retirement. This relatively small sum – which may be equivalent to what you’re saving through lifestyle changes at the moment – will have time to grow and ensure you’re on the right road to achieving your retirement goals.”
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