The COVID-19 pandemic was a global crisis that affected almost everybody in every country and in multiple ways.
From restrictions on travel to mandatory social distancing, work from home orders to legally enforced mask-wearing, the last couple of years were beyond rocky.
Economies are now beginning to recover, and although some strict rules remain in place in the US, it’s a time to reflect on the broader repercussions and how COVID has forever altered our attitudes to financial wellbeing.
Financial Flexibility in a World After Lockdown
One of the core impacts of the pandemic was the light it shone on areas of living and spending that were vulnerable to sudden changes – and made it extremely difficult for people to cope.
For example, thousands have decided to apply for second passports (where they have a valid dual nationality claim) in the hope that they will have more travel freedom during any future pandemic.
People have also realized the importance of health as an asset and are investing in private healthcare, better insurance, or even contemplating relocations to areas with a better public health provision.
From a financial perspective, holidays remain a priority, and much of global travel has begun to bounce back – but people are much less likely to consider a loan to cover the cost.
Spending and Saving Statistics Post-COVID
There is plenty of evidence that consumer habits have changed dramatically:
- Wonga reported a 32% decrease in personal loan applications during the higher levels of lockdown.
- JP Morgan says that eCommerce sales jumped by up to 82%, even when physical shops were re-opening.
- The Office for National Statistics noted a drop of 22.2% in household spending in the first six months of the pandemic.
Of course, some of this is down to obvious factors such as the inability to dine in restaurants or book a foreign holiday – but there are also more nuanced takeaways.
Total savings per household have grown because although many were furloughed or unable to work and adhere to social distancing rules, they equally reduced spending on non-essential items.
Having an emergency nest egg also became considerably more attractive.
We saw vast differences between those economies that managed to save and those that struggled to survive the financial fallout.
Societal Attitudes to Financial Safety
The age-old guidance is to have savings that would cover your essential costs for at least six months if you stopped earning an income – we probably don’t need to clarify that only a small proportion of people have this financial cushion.
However, another notable outcome of the pandemic is that people have identified their lack of stability and the very real possibility that the next health crisis will sweep the rug from under their feet.
Spending has started to make a comeback, incentivised by governmental drives to try and encourage more investment in economies, but those basic tenets of financial budgeting are more prominent.
Lenders continue to recommend people focus on saving rather than spending more than usual to compensate for lost time.
It’s also worth remembering that millions remain in a precarious position and perhaps haven’t been able to find new jobs to replace those lost when businesses folded.
Ongoing inflation, rising living costs and interest rates come at a tough time when so many are trying to rebuild their finances and can ill afford higher outgoings.
That said, fewer are making knee-jerk reactions, such as taking out multiple credit cards to shore gaps in their budgets.
Long-Term Changes to Consumer Spending
The stay at home trend was a natural result of the pandemic, where workers shifted from office-based roles to primarily remote set-ups and spent more time at home due to the temporary closure of amenities like cinemas, sports centers and restaurants.
Panic buying was a negative development and became somewhat normalized as consumers realized the reality of scarcity and relied on online deliveries to keep their cupboards stocked.
Current shortages of baby formula in the US are a good example and again highlight how dependent we are on supply chains – adding to the uncertainty about when (or if) life will really go back to normal.
Spikes in bulk buying have certainly eased, but it seems likely that more households will spend money stocking pantries and buying in bulk rather than expecting to spend compulsively or take a trip to the shop several times a week.
This overarching shift is about a need for stability, security and assurances that any new crises won’t have as crushing an effect.
Therefore, we anticipate that working and socializing at home will continue, consumers will avoid unnecessary personal debt, and spending – while resuming – will be more cautious, considered, and focused on the everyday essentials.