After an initial period of recovery and a return to somewhat normalcy, it was clear that COVID would have a long-lasting impact on our lives. Not only has it affected people’s physical health, but mental wellness and financial wellbeing as well. With such a huge life disruption, how has this changed people’s financial priorities?
This does not constitute advice and advice should be sought in all instances before acting on it.
With financial planning, your values and goals are incorporated into your plan and you can feel confident that the path to your dream future is clear. Priorities are changing – how could you be tweaking your financial plans?
Planning for and protecting the future
One of the changes brought about by the pandemic is the way people are planning for the future. More people are now including their families (as opposed to simply focussing on individuals) and extending their plans to future generations – about 27% more people are now increasing the scope of their financial planning to include future generations.
According to The Scottish Widows UK Household Finance Index™ compiled by IHS Markit, almost three quarters (73%) of households surveyed have considered the future financial wellbeing of their loved ones in their plans.
Additionally, a surprising number of young people – 82% – aged 18-24 support that view and only less than a quarter of all respondents are not considering the future generation at all. The majority of 35-44 year olds are also exhibiting a considerable change in behaviour.
Shifting attitudes towards working and income
In the third quarter of 2021, there was positive news regarding the UK labour market for both job security and employment income. For the first time since the first quarter of 2020, income from employment increased and at the same time, business activity continued to rise. So much so in fact, that the highest rate of growth was recorded during Q2.
This combination of rising activity and greater incomes created an optimistic view in terms of job security – with the lowest level of pessimism recorded since the second quarter of 2019. The strongest trend for job security was recorded in the youngest age group.
Household finances
Another trend is the shift in the amount of cash UK households have to spend. While income from employment did increase, so did the cost of living so any gains were really offset by these increases. As a result, household savings declined steeply, with only the highest earners enjoying a rise in income during Q3.
Additionally, UK households reported a continued fall in demand for unsecured credit – like overdrafts and credit cards – the strongest decrease on record. It seems many people chose the responsible path and opted to pay down their debt and kept their spending in check.
What does your ideal retirement look like?
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