COVID Savings (and Money after the Pandemic)

[Giugiaro]

Good Afternoon!

Here's a thought:


First of all, I understand that there's a lot of people to which the COVID-19 pandemic has essentially been a financial disaster, amid constant lockdowns and lay-offs.
To then, during and post Pandemic, their situation will be less than stellar.

Meanwhile, for those who have not stopped working and saw no impact to their income, the constant lockdowns meant that some money ended up not being spent.
Holidays that never happened, events that ended up cancelled, birthday parties through videocalls, among others...

Considering this, for those in this situation, what do you think is going to happen in the near future after the pandemic?

Will people use the extra amassed money to invest in more expensive holidays? Buy a new car? Seek further education, like Master or Doctorate degrees?
Or will people keep the money in fear that something worse will happen in the near future, and they'll won't have the same financial luck they've had during the pandemic?

I personally started working last year to save enough money to proceed studies abroad. I haven't had much luck prior to get the opportunity to study abroad through scholarships, so I had no other choice but to pay up the full price tag for this once in a lifetime experience.
Meanwhile the Pandemic got any change of doing so, in the schedule I had in mind, pretty much impossible, and then I got the opportunity to get my dream job out of nowhere!

Now I have a lot of savings I don't exactly have a goal for... and thus I pretty much have no idea what to do with them!

 

[Bantamzen]

Might I suggest at least one further option for people that lost money. My wife's self employed business and Arts & Craft network lost a considerable amount of money.

 

[nlogax]

Also another suggestion, this time for a mixture of the above options. There seems to be as many stories in the news about pent-up spend for cars or big holidays as there are about the record pay-down of credit card debts.

 

[johncrossley]

Now I have a lot of savings I don't exactly have a goal for... and thus I pretty much have no idea what to do with them!

Have you got enough money saved so you can retire? If not, then save and invest that money. "Excess" money doesn't have to be spent.

 

[PeterC]

I am lucky enough to be retired but I hadn't realised how much money I was saving until the car's MOT cme around. In 20/21 I drove less that 5000 miles rather than the usual 11000 or so.

 

[Giugiaro]

Also another suggestion, this time for a mixture of the above options.

I've added the option to choose more than one answer.

But that's more of a quick reply. I'd like the discussion to go a little bit further since I believe this "COVID Savings" phenomenon is uncommon in other types of crisis.

 

[Ostrich]

I'd say that our 2020 expenditure was around £5k less than our 2019 expenditure. Like Peter, car mileage has reduced dramatically - only 1,030m between our 2020 and 2021 MOTs! Leisure rail travel has plummeted to £Nil, a saving of roughly £400-£500, and further savings in the "hospitality and leisure" sectors must account for most of the rest. And at the present time, I can't really see a return to pre-Covid spending levels anytime soon.

Nothing to show for it, though. Most of the Covid savings have gone on home improvements, and bailing out Master Ostrich who had to unexpectedly find and finance both a replacement car and new digs .....

 

[MikeWM]

I've added the option to choose more than one answer.

But that's more of a quick reply. I'd like the discussion to go a little bit further since I believe this "COVID Savings" phenomenon is uncommon in other types of crisis.

It is definitely a rather odd situation - where one large segment of the population is significantly worse off because businesses were forced to cease trading, and another segment is significantly better off because they've continued working as before but have had little to spend it on. I'm not sure we've ever faced quite such an odd economic circumstance, and I think it is rather hard to see what will happen as a result.

Personally, I was fortunate enough to be in the 'better off' category. I made a few large-ish purchases last year (new TV, new desktop computer, air-conditioning unit) and have put the rest that I've saved against the mortgage - which given the economic fallout that is likely to continue for many years, seemed the most sensible thing to do.

 

[bramling]

It is definitely a rather odd situation - where one large segment of the population is significantly worse off because businesses were forced to cease trading, and another segment is significantly better off because they've continued working as before but have had little to spend it on. I'm not sure we've ever faced quite such an odd economic circumstance, and I think it is rather hard to see what will happen as a result.

Personally, I was fortunate enough to be in the 'better off' category. I made a few large-ish purchases last year (new TV, new desktop computer, air-conditioning unit) and have put the rest that I've saved against the mortgage - which given the economic fallout that is likely to continue for many years, seemed the most sensible thing to do.

I can't see my finances being massively different. We forked out on a garden summer house, which I guess was partly in lieu of what would have been holidays last year, but the summer house was something we were likely to have done anyway - it was more brought forward as we had the time to clear the plot and do the design work, rather than for financial reasons.

Naturally we've had a bit of a saving on petrol and days out costs, but I wouldn't say this has added up to enough to be highly noticeable.

 

[Kite159]

My outgoings over the last 12 months allowed me to pay an extra £2000 off my car finance agreement and will help pay towards a new central heating system for the house.

 

[telstarbox]

We went for the boring but useful strategy of overpaying the mortgage, which should at least make it easier to move to a slightly bigger place in the near future.

 

[brad465]

Saving for me. Consumerism is driven by some of the best gaslighting this world has ever seen: we don't need to buy large amounts of stuff we don't need, but we get constantly bombarded with adverts, Bank of England and Government rhetoric and peer pressure to buy because our broken economic system depends so much on it, and we're made to believe our lives are not complete until we have specific things others close to us have and/or influencers say are great.

This video describes the above better:

If we were allowed to think for ourselves (something our education systems have prevented teaching us for too long), our current economic model would collapse in a heartbeat. For all the faults in our Covid response, this has been teaching us, and needs to continue to teach us who and what we value most, which often hasn't been buying cheap tat from halfway around the world that gets thrown away and damages the environment to the point we're now at.

 

[Peter Mugridge]

The options in the poll match me...!!

What I am doing is:

1) Adding to savings ( so I've ticked that one )
2 ) Catching up on postponed plans ( but I'm not doing anything more expensive than usual so I can't match any of other three options in the poll to it... it's simply a more intense bit of the usual... )

 

[Journeyman]

I am lucky enough to be retired but I hadn't realised how much money I was saving until the car's MOT cme around. In 20/21 I drove less that 5000 miles rather than the usual 11000 or so.

Yeah, I had my MOT today, and my 7-year-old car sailed through without even an advisory. I've only done 3000 miles since the last one.

 

[Mag_seven]

I think a lot of people will be forced to dig into their savings to help them finance the massive tax rises that will be required to pay for all this. National debt is now at eyewatering levels and it all needs to get paid back.

 

[bramling]

I think a lot of people will be forced to dig into their savings to help them finance the massive tax rises that will be required to pay for all this. National debt is now at eyewatering levels and it all needs to get paid back.

We already have six years of effective tax rises, yet if I had a pound for every person I’ve heard say “isn’t it good, despite everything he’s still managed to freeze taxes”. Sigh!

Yeah, I had my MOT today, and my 7-year-old car sailed through without even an advisory. I've only done 3000 miles since the last one.

I wish same for me. I re-MOT’d my old car last week, it having only been done in December and I wanted to get it back to spring in time for (what should be!) holiday time. Despite having only covered less than 1,000 miles, managed to fail! Turned out both oxygen sensors had managed to give up in the interim, so with that and some other work I managed a 4-figure bill.

In all honesty I was pleased the sensor issue was found, as MPG has shot up, the car is running better, and with that issue it possibly wasn’t doing the car much good. However sitting around not doing much doesn’t necessarily mean nothing deteriorates on cars, in fact I’d suspect the opposite.

 

[Journeyman]

I wish same for me. I re-MOT’d my old car last week, it having only been done in December and I wanted to get it back to spring in time for (what should be!) holiday time. Despite having only covered less than 1,000 miles, managed to fail! Turned out both oxygen sensors had managed to give up in the interim, so with that and some other work I managed a 4-figure bill.

In all honesty I was pleased the sensor issue was found, as MPG has shot up, the car is running better, and with that issue it possibly wasn’t doing the car much good. However sitting around not doing much doesn’t necessarily mean nothing deteriorates on cars, in fact I’d suspect the opposite.

I guess I was in the sweet spot of using it enough to keep everything ticking over nicely, without using it enough to wear things out too much!

I was very relieved - last year was a bit pricy.

 

[yorksrob]

Fom a personal point of view, the one thing that would feel like a considerable improvement in personal circumstances would be owning my house outright, however I've saved nowhere near enough over the last year to do that, so other than doing more of what I enjoy anyway to make up for lost time, I won't be making any major spending changes. Still a mortgage serf.

 

[nlogax]

I've added the option to choose more than one answer.

But that's more of a quick reply. I'd like the discussion to go a little bit further since I believe this "COVID Savings" phenomenon is uncommon in other types of crisis.

Thanks, have amended my vote accordingly.

You're right. It's a unique time for saving money for those of us fortunate to have remained in full time unfurloughed employment..personally I've been able to save a five digit amount (no, not including pence) over the last year. All through not pursuing my hobby of traveling or the side hobby of seeing mates for drinks. I've tried to offset the saving by buying odds and sods..Lego, a VR headset, building a gaming PC, but there's nothing so big that it'd require incurring any sort of credit card debt. As such I've only used the plastic to stock up on air miles that are still impossible to use. Everything has become about savings even when not thinking about it.

There is a kitchen refurb happening now, that's the only major thing I'll have to show for doing absolutely nothing for over a year.

 

[westv]

With no holiday since September 2019 and no travelling to work since March 2020 I have probably added £15k to our savings. This will be added to my early retirement fund which will probably be next year or the year after.

 

[D365]

I am lucky enough to be retired but I hadn't realised how much money I was saving until the car's MOT cme around. In 20/21 I drove less that 5000 miles rather than the usual 11000 or so.

Surprised it made that much difference. My 2012 Fiesta costs £200 for service + MOT each year, no matter what mileage I do. Although I am excluding the cost of replacement parts, that’s usually just an extra £200 per year.

 

[nlogax]

Naturally we've had a bit of a saving on petrol and days out costs, but I wouldn't say this has added up to enough to be highly noticeable.

That’s one thing I’ve actually lost out on. I used to make a modest profit on work mileage. There hasn’t been any at all since March 2020.

 

[Snow1964]

For me did a pension top up
Before crisis was earning decent money (now only about half)

I was just over the £50-60k child benefit taper, so my £12k into pension (Govt adds basic rate rate tax) became £15k into pension, but only cost me about £5k take home pay (as balance would have gone as 40% tax, 1-2% on NI and rest on child benefit clawback)

Surprising how tax efficient pensions top ups can be if have children and just above £50-60k taper

 

[Mintona]

Savings? What’s that then?

Paid some money off debt but would’ve done that either way. Haven’t had any reduced expenditure, as still been working as normal throughout. Meals out just became takeaways instead. Holidays saved but will be added again at some point I imagine. So where we’ve maybe paid extra off debt we’ll most likely be adding back on next year.

 

[Watershed]

We already have six years of effective tax rises, yet if I had a pound for every person I’ve heard say “isn’t it good, despite everything he’s still managed to freeze taxes”. Sigh!

I'm not sure what taxes you are thinking of? Just about the only tax that has risen in cash terms, let alone real terms, is council tax. Admittedly many councils have been raising their bills by nigh on 5% for the last few years, which does adds up.

But most tax-free allowances have increased by inflation or by more than inflation over the past few years, and fuel duty has been frozen for more than a decade.

There are a plethora of valid criticisms to be made against the government, but excessive taxes isn't really one of them.

 

[roversfan2001]

Well the big one for me is that I've moved out of the family home and I'm now renting a flat with my partner. I've got a similarly pitiful amount of savings as I did last year but I've managed to do quite a lot over the last year, 2 foreign holidays in September and a few short domestic breaks too.

My life consisted of football, gigs, pubs and travelling to work pre-COVID so you'd think I'd manage to save a lot but alas not, I just found other things to spend money on, and to be honest I don't regret it - if life had carried on as normal I wouldn't have gone abroad and would probably still be living at home.

 

[kristiang85]

I'm also one of the lucky ones who have saved a lot in the past year (although I'd happily give it all back in return for a past year of normality). My biggest expenditures were commuting, social life and overseas travel, so with all those out of the window for much of the year, I have saved a hefty whack.

With my wedding coming up, that's made saving for that a lot easier. I had originally planned 2-3 months of being antisocial anyway to rack up the savings, so at least that was forced upon me - just too long for my liking.

We are also looking to move house, though this is borne of more wanting to have achieved something rather than the change in financial circumstances.

With my biggest personal expenditure always being overseas travel, and I've saved a lot for that. Sadly I can't do all the trips I've cancelled (11 and counting) as I don't get all my annual leave back in arrears, but I think once travel is easier again I can maybe start spending more on single trips that I probably wouldn't have been able to afford to do before (e.g. Gorillas in Rwanda, a trip to Greenland or a tour of southern Iraq are my current ideas).

With the rest of it, I'm being boring and sticking it into shares and savings. Given the likely squeeze on take home pay in coming years, and that I work on fixed term contracts, it's probably prudent to be sensible in that regard.

Although the done thing might be to spend wildly to stick my savings back into the tax system, I don't really feel I owe the government anything after what they've done to me in the last year. As I intimated at the start of this post, actually living and experiencing life means far more to me than having money, as I will never get that time back (especially as I'm going to have to start a family in the next couple of years, so I really do resent losing this time I had for following my pursuits without that responsibility). I'm certainly spending more in pubs in single sessions than I used to though, as I really want that industry to survive, and I deplore the government's treatment of them.

 

[bramling]

I'm not sure what taxes you are thinking of? Just about the only tax that has risen in cash terms, let alone real terms, is council tax. Admittedly many councils have been raising their bills by nigh on 5% for the last few years, which does adds up.

But most tax-free allowances have increased by inflation or by more than inflation over the past few years, and fuel duty has been frozen for more than a decade.

There are a plethora of valid criticisms to be made against the government, but excessive taxes isn't really one of them.

I was referring to the way thresholds have been frozen.

Take something like inheritance tax as an example. If someone inherits a house worth £1m off their parents today, they pay nothing. If the value of that house increases to £1.5m over the next five years (which with the way house prices have been is far from impossible), and the same thing happened then, they would pay £200,000 in inheritance tax, with the thresholds/allowances now frozen. That’s quite a significant tax rise in my book.

 

[Watershed]

I was referring to the way thresholds have been frozen.

Take something like inheritance tax as an example. If someone inherits a house worth £1m off their parents today, they pay nothing. If the value of that house increases to £1.5m over the next five years (which with the way house prices have been is far from impossible), and the same thing happened then, they would pay £200,000 in inheritance tax, with the thresholds/allowances now frozen. That’s quite a significant tax rise in my book.

That's true. I think it's a less likely scenario than exceeding the Pension Lifetime Allowance, which used to be £1.5m but was cut in stages, finally £1m in 2016/17. Whilst it was subject to inflationary increases thereafter, it hasn't been increased this latest tax year.

£1m might sound like an enormous pension but it's only enough for an income of around £28k if you take an inflation-linked annuity. Yet if you exceed it, any excess you take as a lump sum is subject to a whopping 55% tax rate (excess taken as income is subject to a 25% rate, which isn't quite as bad, but still!).

Neither of these situations are ones that many people face, however with the amount that the government has spent over the last 15 months, it's entirely foreseeable that there will be some significant tax increases across the population.

 

[ainsworth74]

The one that I think might be more relevant is the substantial hike in the Insurance Premium Tax rate. From 5% around a decade ago to 12% now. Lots of people buy insurances of various types and all now pay more just in tax on it.