More Britons have picked up the savings habit says Nationwide Building Society

Around two in five have saved more than they usually would in recent months as a large chunk of day-to-day expenses disappeared during lockdown, a survey by Britain’s biggest building society shows.

A similar number will continue with the new found savings habit, despite the dramatic drop in rates on offer from all ranges of accounts, from easy-access to bonds, and Isa to current account interest.   

With many losing their jobs, living on reduced incomes and facing an uncertain future, some 16 per cent said they had saved less since the beginning of lockdown on 23 March.

It means a net 21 per cent have managed to save more during the pandemic.  

Saving for a rainy day: Over a third of Brits said their savings habits will change post lockdown

Those aged 18 to 34 have been the keenest savers of all age groups in the past months, with some 45 per cent saying they’ve put more money aside for a rainy day than they usually do.

It is also the age group most likely to continue to save, with more than half pledging to save more in the future, suggesting that the pandemic has helped create a new, younger nation of savers. 

Overall across all age groups, over a third, said their savings habits will change post lockdown, according to a large survey from Nationwide Building Society. 

Tom Riley, director of banking and savings at Nationwide, said: ‘Whether this is the start of a new savings culture remains to be seen, although the pandemic has certainly made us look at the need for a financial buffer for a range of reasons.’

‘Interestingly, a large portion have changed their savings habits as a direct result of the pandemic, so we may well see a shift in the nation’s savings culture over the coming months as new savings routines begin to stick.’

That’s despite banks continuing to slash savings rates, as the Bank of England’s base rate remains at a record low of 0.1 per cent.

Last month, 645 accounts beat inflation, but this month the number of such accounts has fallen to 450, according to recent analyst Savings Champion. 

As well as 16 per cent saying they have put away less, a similar number have had to dip into their savings as a direct result of the coronavirus pandemic. 

This jumps to more than a quarter, or 27 per cent, of those unemployed. 

As the future remain uncertain, 39 per cent of those who have used their, or their children’s, savings say it’ll take longer than six months to recoup the money they have spent, according to the survey. 

Consumer spending is continuing to improve but it still is way below pre-lockdown levels

Consumer spending is continuing to improve but it still is way below pre-lockdown levels

A possible structural shift towards less spending and more saving, as highlighted also by other recent data, does not bode well for a Government pinning all their hopes for economic recovery on consumers returning to spend like before the pandemic.

Consumer spending is continuing to improve, as shown by another report published today, but it still remains way below pre-lockdown levels (see graph above).

IHS Markit’s monthly Household Finance Index has risen to 41.5 in July, up from 40.7, but a reading before 50 still indicates an overall squeeze to finances.  

‘July data illustrates that UK households continue to tighten the purse strings despite a phased reopening of the economy and return to work after the lockdown period’, said Tim Moore, director at IHS Markit.

He says Britons were ‘extremely cautious’ in their spending patterns because of a growing anxiety about whether they will still have a job in the coming months.

Britons are 'extremely cautious' in their spending patterns because of a growing anxiety about whether they will still have a job in the coming months, according to IHS Markit

Britons are ‘extremely cautious’ in their spending patterns because of a growing anxiety about whether they will still have a job in the coming months, according to IHS Markit

Moore continued: ‘Almost four times as many survey respondents reported a decline in job security as those that saw an improvement in July. 

‘Large numbers of households are therefore maintaining the cautious spending habits adopted during the early stages of the pandemic and are now focussed on paying down debt and saving where possible.’  

Nationwide’s report also asked people to think about the savings buffer people feel they would need to set aside for unexpected expenses.

The average person feels they need £12,212 to feel financially comfortable should another similar pandemic hit the UK, according to the report.

It also looked at regional trends. It shows those in Yorkshire were the most likely to have saved more since social distancing measures were introduced, while those in the South East and South West the least likely to have saved more. 

It comes as National Savings and Investments have hugely revised its financing target this year, with Britons pouring in money at record levels since the pandemic begun.

It raised the target, which runs from April 2020 to April 2021, a mammoth 483 per cent, from £6billion to £35billion.

It says the move has been made to ‘reflect government finance requirements arising from Covid-19.’

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