Have you reassessed your financial preparedness because of the coronavirus crisis? A new report from Close Brothers, ‘Changing Trends of Financial Wellbeing’, suggests the crisis has prompted a major rethink about our finances and money habits.
According to the report, just over half of us felt financially prepared for the crisis. However, one-in-five said they went into the pandemic financially unprepared, with 8% saying they were ‘very unprepared’. Two in five workers reported increased financial anxiety in the wake of the pandemic.
Within the report, Close Brothers offered a tangible insight into the UK’s overall financial wellbeing landscape, looking at how prepared workers were when the Covid-19 pandemic hit our shores. The report also looked at the challenges they faced, and the steps they are taking to increase financial resilience for the future.
Responding to the crisis, 50% of workers now have plans in place to improve their financial preparedness. Around a quarter have already made positive changes in the wake of the pandemic. A comparable proportion is looking to make changes in the near future.
But the willingness to change levels of financial preparedness is lower as income levels fall. 57% of workers earning more than £50,000 a year said they were willing to change their plans, but only 48% of workers earning up to £30,000 a year were making changes.
For people making changes to improve their financial wellbeing, the most popular changes include keeping a closer eye on day-to-day spending, saving more into a cash emergency savings fund, and writing or updating a will. Others have set aside more money each month for their retirement plans, saving more into a workplace or personal pension.
But 16% of workers say they will reduce the amount they save into their pensions, due to pressures on shorter-term needs, despite the risk that this could affect their longer-term financial wellbeing. Some have also experienced positive revelations about their financial situation, with 44% saying that they have spent less in general as a result of the pandemic and 17% realising they can live happily on less each month. A comparable proportion of workers are shifting money they would have typically spent into saving pots for their financial future.
Jeanette Makings, Head of Financial Education at Close Brothers said:
“The coronavirus crisis has drastically changed all aspects of life as we know it, but it has also brought a sharper focus on money, particularly in how prepared we are to weather unexpected financial events.
“While it’s hugely reassuring to see that over half of workers in larger businesses felt financially prepared, there are still a large proportion that are not, so there’s more work to be done there with individual employees and via their employers to support improved financial resilience.
“But there are some positives messages regarding people’s changing attitudes to their own financial health; with people keeping a closer eye on day to day spend, realising they can happily live on less and putting the money they would otherwise have spent into savings instead, all of which bodes well for their future finances. Although we are yet to see if these changes are a permanent or temporary legacy.
“There remains a huge amount of uncertainty around the short, medium, and longer-term impact of the coronavirus pandemic on individuals and businesses too. Financial stress can affect mental health and an
individual’s engagement and performance, so impacting business results.
“Employers that provide financial wellbeing support, particularly during the most challenging of times, are likely to increase loyalty and respect as well as offering the support to encourage better financial futures for their employees.”