One in four spent lockdown savings on paying bills

New research has found that one in four people spent their lockdown savings on paying bills.

The research by Opinium on behalf of Hargreaves Lansdown found that 47% of people saved something during the lockdowns, of those who saved something, and could remember how much, around a third saved more than £3,000.

Only a third of people haven’t spent any of their lockdown saving with the most common thing to spend on was home improvements, followed by bills and holidays.

Sarah Coles, Senior Personal Finance Analyst, Hargreaves Lansdown said “Higher prices are eating away at our lockdown savings. Half of us saved when we were unable to go out, but most of us have spent at least some of this money, and worryingly a quarter of people have seen their savings devoured by everyday costs – like bills. Rising prices means an awful lot of people will have nothing to show for this one-off windfall, so they’re no more financially resilient than before the pandemic.”

“Lockdowns were hard on everyone, but they affected our finances in very different ways. While almost half of us managed to save some extra cash while we were stuck at home (47%), around a quarter broke even (23%) and more than one in 20 needed to borrow more to pay the bills (7%). Meanwhile, just over one in five (22%) don’t know whether they managed to save or not.”

“The average saving was £1,377, but the extra financial resilience we managed to build up varied dramatically. Overall, of those who saved something (and could remember how much) around a third saved up to £1,000, a third saved between £1,000 and £3,000 and a third saved over £3,000.”

“The higher our income, the more we saved on average, which is one reason why men were twice as likely as women to have saved more than £5,000. This is likely to owe much to the fact that a larger proportion of the incomes of higher earners goe”s on the kinds of discretionary spending that were out of the question – like holidays and eating out. It also comes down to the fact that higher earners were often more able to work from home, which kept their spending to a minimum.

“However, in most cases this wasn’t just a case of not being able to spend money. Around half said they were only able to save because they made a major effort to do so, compared to one in seven who built a savings buffer without trying (the rest credited a mixture of them both). Those aged 65 and over were the most likely to have saved without trying. This may be because not having to leave the house to go to work, and facing a bigger health risk from socialising meant a larger proportion saved money by staying home.”

“Two years on from the first lockdown, a third of people still haven’t spent any of their lockdown savings. The older we are, the more likely we are to have held onto it all, and more than half of those aged 65 and over haven’t spent any of their lockdown savings yet. This owes something to the fact that those who are living on pensions and savings know their ability to put aside a lump sum like this again is limited, so they want to ensure they have this extra financial resilience when they need it. This is also why our propensity to hang onto the cash grows as our incomes fall: only 10% of additional rate taxpayers hadn’t spent any, compared to 39% of basic rate taxpayers.”

“However, those aged 75 were the most likely of any age group to say they’d spent it all – at 11% compared to 7% overall. It’s likely many of them spent much of their retirement wishing they had a lump sum for something specific, so as soon as they had it, they knew what to spend it on. Overwhelmingly this included home improvement – with 40% of those over the age of 75 who’d spent at least some of the money splashing out on their property.”

“Overall, just under half have spent up to half of it. When we asked people where the money had gone, the most common answer was home improvements, with 29% of people ploughing at least some of their lockdown savings into a home makeover.  Holidays were also popular – at 26%, and other treats at 20%. In many cases people had been unable to go on holiday for much of the pandemic, so when they got the opportunity, they put their money to good use.”

“There was also the chance to buy treats we wouldn’t normally be able to afford, to make up for an incredibly difficult couple of years. The very youngest were the most likely of any age group to spend it on big things that they may not have had the cash for before, including new technology (27%) and a new car (20%).”

“However, worryingly, just over one in four people (26%) said they spent at least some of the money on everyday costs like paying bills. It has been incredibly useful to have a cash cushion as prices have started to rise, and it has given people something to fall back on while they make changes to their lifestyle, so they can bring their costs back under control again.”

“However, the risk is that people haven’t been able to make these changes, so they’re spending their way through their savings. When this runs dry, they will still fall short at the end of each month, and they’ll have eroded their financial resilience in the interim.”

“Those aged 55-64 were most likely to fall into this group – at 39% – which is likely to be due in part to the growth of early retirement during the pandemic. The ONS found that those in professional occupations were more likely to retire early, and that one in five of them said their savings had increased during the pandemic. Spending their way through these savings may therefore just be part of the plan.”

“We also asked people whether they had savings, and 73% of people do. This is the same level as when we asked the same question before the pandemic, in September 2019. There’s a good chance that many of these people have more savings than they did before, but this one-off windfall hasn’t changed the face of saving for good.”

How we spent our lockdown savings

	Overall	18-24	25-34	35-44	45-54	55-64	65-74	75+
Home improvements	29%	17%	31%	27%	32%	32%	32%	40%
Holiday	26%	33%	28%	23%	25%	27%	20%	13%
Everyday costs including bills	26%	23%	26%	21%	28%	39%	25%	15%
Treats	20%	24%	21%	23%	21%	15%	13%	11%
Replacing/mending items	16%	17%	15%	17%	15%	15%	20%	18%
Helping family or friends	15%	13%	20%	15%	11%	12%	17%	15%
New technology	15%	27%	18%	9%	16%	7%	8%	6%
New car	11%	20%	15%	5%	11%	3%	5%	0%