Data from the US, UK and Australia shows that 2020 has had a big impact on our spending.
It’s no understatement to say that a lot changed in 2020. In fact, it’s more of an overstatement or cliche in the sense it’s been said over and over.
Like many cliches, there’s a significant element of truth to the statement. One area that has changed for many of us is our spending. Data from the US, UK and Australia shows that lockdowns and restrictions, as well as economic uncertainty, have reshaped the way we make financial decisions.
Across the board we’ve seen an increase in online spending, as well as other shifts such as:
Here are some of the other trends:
A survey in the US found that 63% of people had cut back on spending, with gen z the most likely age group to have cut back at 67%. Of the people spending less, 6 in 10 said they were generally being more cautious and almost 1 in 2 said their income/salary had been reduced.
In early May in Australia discretionary spending dropped to 60% of average and total spending dropped to 80%. But by December spending has largely returned to normal levels.
While in the UK, 57% of people have reduced spending even though 65% of people’s income remains unchanged.
Spending may have decreased on the whole, but there are some areas that have seen significant boosts. Perhaps most notably, by 30 August food delivery spending had increased 451% in Australia.
In the US, 1 in 2 people who are spending more said it was because they were buying more groceries and household supplies. The story is similar in the UK where spending on food is up £249 a month per household and spending on alcoholic drinks is not far behind with an increase of £129.
The need to build emergency savings has become even more apparent during Covid-19.
Almost 1 in 2 people in the US have run out of emergency savings and 8 in 10 say they wouldn’t be able to afford a $500 emergency expense. In Australia, saving increased from an average amount of $604 a month in January to $793 in June, with a Twitter poll finding that 1 in 4 people were putting money away for a rainy day.
Finally in the UK the rate of saving increased to £29.10 for every £100 received by a household – this is up from £6.8 for every £100 in the same time period in 2019.
What has become clear in 2020 is the importance of being financially secure, so when something unexpected happens you’re in the best place possible to manage it.
For employers, this means providing employees with the tools that make managing money simpler and reduce the need to borrow to make ends meet.
And for employees, it’s important to prioritise financial resilience. For example, building an emergency fund means there’s a buffer to fall back on if you need it.