The changing savings and spending habits of the UK during lockdown

Authored by Aviva

Inability to save, the impact of economic and stock market volatility on finances, and struggles to pay household bills are the top financial concerns of UK adults during lockdown

At the same time, typical UK household could be saving £171 per week as spending on non-essential items has fallen

More females than males (38% vs. 29%) feel as if they have less money to spare at the end of the month than they did before the lockdown

Londoners are feeling the least confident about their finances during lockdown

Spending and saving patterns have changed dramatically during the UK lockdown brought in to contain the spread of coronavirus. Traditional habits have been turned upside down, and household budgets that guided our incomings and outgoings before the pandemic are no longer valid.

Aviva’s analysis of consumer sentiment alongside official household spending data reveals the inability to save is the biggest current concern for UK adults (26%), as earnings have been disrupted for millions of workers. UK adults also cited economic and stock market volatility reducing the value of their pension or investments to be a key concern (23%), as well as an inability to pay household bills (19%).

However, at the same time, spending on non-essential items has fallen as a result of government instructions to stay at home. This means that typical UK households could be spending 29% less per week in total during lockdown compared with ‘normal’ times, which could equate to an overall saving of £171.

Aviva estimates that increased spending on items such tea, coffee, chocolate and energy consumption and pastimes like TV subscriptions (Netflix, Sky) – adds around 6% to the average households’ weekly spending. This is likely to have been significantly offset by reduced or zero spending on leisure pursuits halted by the lockdown. These include holidays, house moves, eating out, clothing, hairdressers and trips to the cinema, theatre, and museums – potentially reducing the typical households’ average weekly spending by 35%. Overall, this creates a net saving of 29%.

Age and gender inequality

More females than males (38% vs. 29%) feel as if they have less money to spare at the end of the month than they did before the lockdown.

In comparison, most males (66%) feel as if they have more to spare at the end of the month or have the same amount as they did before the lockdown – fewer females (56%) feel the same.

Almost a third of 25-34-year-olds (32%) are more concerned about their ability to save during the UK lockdown. This age group is also most concerned about losing their job due the impact of Covid-19 (28%).

Alistair McQueen, head of savings and retirement at Aviva said: “Female savers look to have been disproportionately affected during the lockdown, as workers in sectors like hospitality and retail, are more likely to be younger females. Younger people across the board also face a significant challenge. Those under 34 typically struggle to save under normal circumstances, but the current conditions have exacerbated this, as they continue to come up against large costs, but face a more uncertain financial future. For example, this age group typically spends a greater proportion of their budget on housing, and bills, which remains unchanged. This is likely to have been a major influence on demand for mortgage payment holidays.”

Regional divide

Aviva’s analysis also highlights regional differences across the country as household saving and spending patterns change. People living in London are the most likely to feel the inability to save is their biggest concern currently (30% vs. UK average of 26%). Almost half of all Londoners lack confidence in their own financial situation at the moment (48% vs. UK average of 38%).

When asked whether they have more or less money to spare at the end of the month than before lockdown, adults living in Plymouth were most likely to be ‘lockdown savers’ while those in Brighton were most likely to report ‘lockdown losses’. 

Lockdown savers (% who have saved more than usual during lockdown)

Plymouth (43%)

Brighton (49%)

Sheffield (36%)

London (39%)

Nottingham (34%)

Lockdown losses (% who have saved less than usual during lockdown)

Southampton (39%)

Leeds (33%)

Manchester (37%)

Newcastle (33%)

Norwich (35%)

Alistair McQueen continued: “Many factors will determine how different parts of the UK are faring financially, including how much of the local economy is based on tourism, retail and leisure and how much it relies on public transport.

“As households continue to navigate through unforeseen circumstances, now is the time to keep savings and spending habits under careful and regular review. It is good practice to weigh up what we are spending each month, and how much more or less we are saving.

“If you feel as if you have more cash to spare at the end of the month during this time, it’s important to consider a good home for it. Maintaining or even increasing pension contributions could be an attractive longer-term option for savers who can afford to do so, so that money you would otherwise have paid in tax on your earnings goes straight into your pension pot via tax relief. Providing you can access other funds at short notice if you need them, then small extra savings today could make a big difference tomorrow.”

Here are five top tips to help you update your household budget in the wake of coronavirus.

Invest the time: Many of us rush to plan financial budgets but spending more time could deliver greater rewards. Allocate a couple of hours to budgeting and prepare in advance by gathering the previous year’s pay slips, bank statements and credit card statements.

Look back: Few of us know how much we really are spending each month, and on what. So, go through your pay slips to understand how much money is coming in, and then go through your bank and credit card statements to understand how much is going out, and on what.

Look forward: Use the information you gathered in step two to estimate how much you may spend in the coming year, and in what areas. And remember that the coronavirus lockdown will mean you are probably spending more in some areas and less in others. The government-backed Money Advice Service has a great online calculator to help you. See here - https://www.moneyadviceservice.org.uk/en/tools/budget-planner

Calculate the gap: With the above information, you will now have a better understanding of how much money is coming in, and how much money is set to go out, and where. If you are spending more than you are earning, this is not good.

Take control: Now you can revise your budget to ensure you are in control of your money. First, look at the top ten biggest areas of expenditure and think if there is a way of saving money, perhaps by shopping around and switching suppliers. Second, look at where any savings are going and think if that money could be working harder elsewhere – for example, perhaps swapping to a bank account that pays more interest; opening an ISA; or paying more into a pension. Third, keep track of your monthly spending, and revise your budget as you go along.