1 in 3 UK adults feel pressured to spend as the economy reopens, creating feelings of anxiety

Share

Share on facebook
Share on twitter
Share on linkedin
Share on email
  • Millennials and Gen Zs feel more anxious and a greater pressure to spend than any other generation
  • Mixed emotions towards the economic reopening come as 53% of Brits were able to boost their savings in lockdown
  • Millennials and Gen Zs hope to maintain lockdown saving habits and save more in 2021 than in 2020

The end of all lockdown measures and Covid-19 restrictions is set to be celebrated nationwide. However, new research from F&C Investment Trust and BMO[1] has found that large swathes of the UK population share a sense of nervousness when it comes to the potential impact of the economic reopening on their personal finances.

Almost one in three UK adults (30%) are feeling pressured to spend as the economy reopens. This sense of pressure is driven by a desire to support both the UK economy (30%) and local businesses (31%), with UK consumers mindful of the fact the UK’s post-Covid recovery is dependent on their willingness to spend.

Additionally, with holidays, nights out and entertainment potentially back on the cards next month, a third of UK adults (35%) are also feeling nervous about the thought of having less control over their spending as the reopening becomes a reality.

Millennials and Gen Zs feel greatest sense of unease

Millennials (24-40 years) and Gen Zs (17 to 23 years) are feeling this anxiety and pressure most acutely. Whilst 1 in 3 Gen Zs and Millennials (35% and 29% respectively) are excited to spend their lockdown savings, half of Gen Zs (50%) and Millennials (47%) feel anxious that they will no longer be able to save as much as they did during lockdown.

On top of these feelings of anxiety, a significant proportion of Gen Zs (36%) and Millennials (35%) feel a sense of pressure to spend and support local businesses, whilst one in three (35% of Gen Zs and Millennials) also feel the same when it comes to rebooting the UK economy.

UK youngsters are determined to save amid the economic reopening

These feelings of nervousness come as many used the lockdown period to significantly boost their savings. Half (53%) of Brits managed to increase their savings over the course of the pandemic, with the average adult saving £1,515 since the first lockdown in March 2020.

Furthermore, despite the hardships faced by young people since the start of the pandemic, the average Gen Z and Millennial have been able to boost their savings by £1,527 and £1,552 respectively since March 2020. This equates to 5% (Gen Zs) and 4% (Millennials) of average household income for these generations.

With such a sizeable pot built up by these age groups, half (46%) of Gen Zs and 43% of Millennials are feeling anxious about the possibility that the economic reopening will force them to dip into their nest egg of savings built up during lockdown, and a further two in five (45% and 40% respectively) worry that post-lockdown life will cause them to have less control over their spending.

This worry is reinforced by the fact the lifting of restrictions has already seen people across the UK increase their outgoings, spending – on average – £48 more per month now than during lockdown. For Gen Zs and Millennials the average spend is even higher at £66 and £54 respectfully, explaining why anxious feelings have started to set in.

However, this age group is determined to see their lockdown savings habits last. In fact, despite the reopening of shops, travel and leisure, the majority of Gen Zs (77%) and Millennials (74%) are planning to save more in 2021 than they did in 2020.  

Gen Zs and Millennials have long-term ambitions for lockdown savings

For a significant proportion of 17 to 40 year olds, the Covid-19 pandemic has accelerated their plans for the future and subsequently their ambitions for these savings.

Covid-19 has accelerated these generations’ plans to buy a first home, pay off debt and start a business. With these ambitions in mind, it comes as no surprise that many in this age group are feeling anxious about the UK reopening, and what this will mean for their finances.

Figure 1: The proportion of Gen Zs and Millennials that have had the following plans accelerated due to Covid-19.

Gen Zs
Millennials
Privately educate children
31%
44%
Start a business
31%
34%
Change jobs/career
29%
33%
Pay off debt
27%
32%
Live abroad
29%
29%
Buy or replace an existing car
28%
26%
Buy first home
24%
28%

Reflecting on the findings, finance coach and author of ‘How To Save It’, Bola Sol commented: “The Covid-19 pandemic has presented unprecedented change and challenges to the finances of Gen Z and Millennials. Despite these unparalleled shifts, it is encouraging to see that so many were able to save during this difficult period, with unwavering commitment to their long-term dreams and goals. The events of the last year have seemingly ushered in a new generation of savers, who are demonstrating a clear change in mindset by continuing to keep up the good habits developed during lockdown. Generation spend may have just become generation save.”

“However, this newfound passion for saving also comes with its own set of challenges, namely the fear of overspending, especially with restrictions loosening and our social lives thriving once again. But we cannot overlook the fact that young people across the UK have taken more control over their finances in the past year, and should therefore feel empowered and confident that they can spend within reason whilst still putting money aside to save for a rainy day, and even more importantly, their future. It may take strong will and some time to establish a new spend-save balance, but the good habits developed during lockdown should give people the encouragement they need to achieve this”.

To maintain this happy balance and keep feelings of anxiety at bay, Bola Sol has developed the following tips:

  1. Assess your financial situation and create a budget: To save effectively, you need to know your starting point. So, it is important to review your bank balances, direct debits, debt, bills, and your typical spending habits. Knowing the difference between your outgoings and actual income will help you save more comfortably and know your spending limits.
  2. Review your Covid savings: Many of us had to go without during lockdown. Between meals out, beauty treatments, and holidays abroad, we spent less in certain areas of life. So, with the UK opening up, now is the perfect time to ask yourself whether you truly need to start spending on certain items, events and experiences, or whether you can continue to live without, take the D.I.Y approach and save yourself the money.
  3. Automate your savings: A direct debit to your savings account on payday is a great way to avoid spending more than expected. As the saying goes, out of sight out of mind. This will eliminate the ability to spend as your earnings hit your account, turning payday into save day. This can also be taken one step further by organising a direct debit to an investment product such as a stocks and shares ISA. That way, you’re eliminating the temptation to spend whilst putting your money to work and growing your wealth.
  4. Set up a social fund: With lockdown ending, we are all keen to socialise with friends and family. However, it can be easy to get carried away and spend more than you’ve budgeted for. To avoid this, set up a social fund and allocate a proportion of your outgoings to these outings and other spontaneous events. That way, it is budgeted for and won’t encourage you to erode your savings.
  5. Save little and often: Saving small amounts frequently can go a long way for your financial nest egg down the line. The ‘little’ ensures your financial stability isn’t compromised at the time of saving, and the ‘often’ means the act of saving becomes habitual, whilst also ensuring your pot is constantly growing. There are also a number of apps that can help you do this and put the funds aside for you.
  6. Turn to investing: Whilst saving can put you on the right track towards your long-term goals, investing your savings could take you that one step further and help you realise your ambitions sooner. A stocks and shares ISA is a great way to start, putting your money to work to help you increase the value of your savings and outperform inflation.

Ross Duncton, Managing Director, Head of Marketing & Direct, BMO added: “It’s inevitable that as holidays, festivals and meals out are permitted, our ability to save each month is likely to be more limited. However, for those that are keen to maintain their saving habits and pursue their goals and ambitions, investing is an option worth exploring.”

“With savings accounts offering such low interest rates, investing gives us a chance to grow our savings meaningfully and efficiently over the long-term, so you may not have to put away as much money each month to achieve your overall savings goal.”

“To build a pot of £5,000 in two years, a “saver” would have to save approximately £208 a month, compared with just £171.50 a month if your monthly savings were invested in F&C Investment Trust.2 Investing is therefore one way we can help maintain our lockdown savings, without having to maintain our lockdown lifestyles.”

Let’s talk about risk

Past performance is not a guide to future performance. The value of all stock market investments can go down as well as up and you may not get back the full amount originally invested. If you feel you need specific investment advice that takes your individual circumstances fully into account, please talk to a financial adviser.

Invest with BMO

BMO offer a range of cost-effective savings plans designed to make it easy for you to invest in our range of funds.

Starting from £25 per month or a lump sum of £100, with the flexibility to start and stop contributions whenever you want.

There are no dealing charges on investments made online or through a monthly direct debit.

Invest with a broker

You can invest through your usual financial adviser, or through a wide range of companies.

Information in this section of the Website is directed solely at persons who are located in the UK and can be categorised as retail clients. Nothing on this website is, or is intended to be, an offer, advice, or an invitation, to buy or sell any investments. Please read our full terms and conditions and the relevant Key Information Documents (“KID”) before proceeding further with any investment product referred to on this website. This website is not suitable for everyone, and if you are at all unsure whether an investment product referenced on this website will meet your individual needs, please seek advice before proceeding further with such product.

[1] Research is based on an online survey of 4,000 people in the UK aged 17-77, conducted by Opinium between 1st- 10th June 2021

[2] Figures calculated by F&C Investment Trust using Lipper Fund Performance by Refinitiv. Figures are an approximation.