Article1 July 2020

Coronavirus unequally impacts savings

Day-to-day spending is different during corona, with many feeling they are saving a little more and spending less while in lockdown. But households are experiencing divergent consequences: those with savings are likely to be saving even more now, while those without, are just as likely to be saving less

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Money management impacted

In the face of the uncertainty imposed by coronavirus, people across Europe are being careful with their money. Many self-report actively changing their daily spending and saving activities.

The latest ING International Survey combines responses from almost 26,000 people across 13 European countries, collected both before and during the lockdown imposed to address the spread of coronavirus. Over this time, day-to-day money management has changed for many people.

Just under half (44%) say they are now spending less due to coronavirus, while 30% say they are saving more.

These changes will have been driven by both necessity and choice. While some are no longer working, and so actively limiting their daily spending due to reduced earnings, others are finding they have more left over at the end of each week simply because they don’t have the opportunity to go out and spend.

Unequal changes

Even with perceived day-to-day shifts, there have been no significant changes in average self-reported household saving levels. The number who report having no savings, has remained stable - 26% in May’20 compared to 28% in Dec’19. We have asked this question annually for the past eight years and it consistently fluctuates between 25% and 35%.

But aggregate values mask some important discrepancies. For example, it is the 26% of households with no reported savings, and the 36% of those with savings, but less than the recommended three months’ worth of take-home pay, who are now more likely to say they are saving less due to coronavirus. This group is vulnerable to adverse financial shocks.

Putting savings aside supports financial flexibility, which is critical when facing relative uncertainty, such as that associated with the spread of coronavirus.

Savings comfort hasn’t dropped

Despite the unequal financial impact of coronavirus, the self-reported changes in saving and spending may have led some to feel more comfortable with what they have saved. Our questions comparing attitudes before and during the coronavirus pandemic showed a slight drop in the percentage of Europeans who say they would need either much more or a little more savings to feel they were in a comfortable position (73% to 68%).

Yet, it was felt more so in some groups than others. The largest shift was among the middle aged and those working, and therefore also earning. It’s unsurprising the group who have maintained an income throughout the past few months are most likely to report financial comfort regarding savings levels.

So, while the lockdown may have presented opportunities for some to increase how much they save, others have suffered financially which has impacted how much they can put aside each month.

Coronavirus’ impact on household finances may have been inevitable and has presented yet another obstacle for savers to navigate.