Skip Header

Financial pain of Covid has fallen unequally

Ed Monk

Ed Monk - Fidelity International

The damage to health and finances from the Covid-19 pandemic has not fallen evenly.

It has been devastating for many while leaving others relatively unscathed and, cruelly, it has often been those already vulnerable who have been worst hit.

In the jobs market, whole sectors were forced to effectively cease trading leaving anyone employed within them dependent on the safety net of furlough. Meanwhile, a great many others were able to work perfectly adequately at home in industries that were not harmed - and may have been helped - by lockdown.

This imbalance can be seen in the results of research from Fidelity which looks at people’s saving and spending during the pandemic. It showed that some 60% of people had to raid their savings in order to cover day-to-day spending, with an average £843 being withdrawn across the period.


Meanwhile, many others found themselves better off with more than a quarter of people - 26% - confirming that they have increased their savings. And not by small amounts either - the average amount saved by those able to put more aside was £1,649.

Another finding was that younger people were most exposed, with the proportion of those in their 20s raiding savings as high as 78%. At the other end of the age range, among those who were able to save money, it is older people who were able to put aside the most - with savings for those in their 60s averaging £1,909.

The research shows the vital support that some cash savings can provide if there is a sudden worsening of your circumstances, for example if your earnings fall for any reason. With so many having to dip into savings over the course of the pandemic, it is inevitable that many others without savings to start with will have fallen into debt.

That’s why having a pot of emergency cash on hand is a fundamental first step towards achieving financial security. Ideally, you will have enough money saved to cover your essential outgoings - like rent or mortgage, bills and food - long enough that you can recover. Between three and six months is often advised.

If you have that in place, the task then becomes to boost your long-term savings. That might mean paying extra into your workplace pension or starting to think about investing.

If you’ve found that you’re spending less than you were previously and have a little extra left over each month, now is the time to plan so that you lock in those savings. Funnelling them into your workplace pension  means that any gains you make will be free of tax.

By locking in any savings you’ve made it’s just possible that this difficult period might bring some benefit in the long-term.

Source:

Fidelity International, November 2020. The survey is based on a sample of 3,000 UK adults during October 2020.

Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you investTax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not normally be possible until you reach age 55, this may change to 57 in 2028.This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.