How Has COVID-19 Affected Personal Finances?

In March 2020, most of the world was told to go home, stay at home and await further instructions. The response to this directive was varied. Some individuals ran to supermarkets in a frenzy, knocking the frail out of the way, to buy pasta and toilet roll. Doomsday preppers smugly said, “We told you so!”. Others simply saw it as time away from their boss. Conspiracy theorists claimed, “It’s a conspiracy!” but they do have tendency to do that.

In some quarters the claims of a global pandemic were met with bemusement or scorn, even by certain world leaders. Within weeks it seemed everyone was an armchair scientist with fool proof strategies to rid the world of the virus and the most used word in the English language became “Unprecedented”.

What became apparent by April as cases, deaths and the unemployment numbers grew as direct consequences of the pandemic, is that the world had a very serious problem on its hands that wasn’t going to go away, as some had predicted, anytime soon.

The COVID-19 pandemic quickly created a tale of two economies: those who were able to save, and those who struggled to make ends meet. While conventional wisdom is to have around 6 months’ salary worth of savings as an emergency fund, for some individuals and families on lower incomes or with higher monthly expenses this is an impossibility.  As millions of people lost their jobs, all sizes of businesses were forced to close and living expenses piled up, where emergency funds were available, they soon depleted. The stimulus checks helped, but not necessarily enough.

That’s one part of the story but as we know not everyone suffered, some had made adequate financial provision, some businesses weren’t affected and some even thrived. Delivery services, grocery stores, game companies, tech and tutoring services are all industries which benefited from lockdowns. As many of us sat in front of Netflix watching The Tiger King and alike, alcohol became another form of entertainment and wine sales rocketed. When we realised that this wasn’t going to be a sustainable long-term strategy (although many made a commendable effort to see how far they could take it), fitness equipment companies began to reap the benefits.

For many of those who are still employed — or who have a spouse who still is — it has changed how they use their money. Some have cut expenses and increased savings, paid off debt, or donated more to help those in need. Others have spent more on impulse purchases, made big life moves or postponed them.

There is little doubt that Coronavirus pandemic has brought savings back into sharp focus for the average household. A combination of financial concern and falling household spending means that those whose incomes have survived the pandemic, thus far at least, have been far keener to save their money. More than a third of Britons plan to maintain new saving habits adopted since the arrival of COVID-19, according to research into changing attitudes and behaviours towards household finances (research by AVIVA).

Changing attitudes towards saving have been partly driven by the shutdowns to the leisure, hospitality and retail sectors limiting recreational spending opportunities, which has left some households with spare disposable income. The trend is also likely to be influenced by people seeking to build a savings buffer to guard against potential further economic downturn.

It’s more important than ever that households have as much visibility over their finances as possible. It’s clear we’re not out of the woods in terms of potential future shocks caused by the pandemic. Yet many do not, or cannot, access regulated professional financial advice. This means large swathes of the population are acting alone in planning their financial future.

Set clear and achievable goals – Be realistic. Review your income and expenditure levels for each of the last six months to get an idea of your current spending habits. Then set incremental changes each month to ensure you begin to save more without negatively impacting your living standards. Understand your current savings and projected retirement fund – Identifying how much your exact level of current savings and monthly saving contributions will leave you during retirement can help you adapt your long-term financial goals.

Singapore Expat Advisory

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Singapore Expat Advisory is an advisory platform for Promiseland Pte. Ltd Pte Ltd and are authorised and regulated by the Monetary Authority of Singapore (MAS).

General Information Only This article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any products (including funds, stocks) mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser regarding the suitability of the investment