Has the pandemic turned us into savers for good? 40% now plan to save more than before Covid but we're giving up on keeping cash in bank accounts...

  • 39% plan to save bigger chunk of income than they did before the pandemic
  • That proportion rises to 55% of 25-34 year olds and 47% of 18-24 year olds
  • Stashing away more cash is a normal reaction to major economic downturns 
  • Stocks and shares ISAs and cryptos set to become more and more popular 

By CAMILLA CANOCCHI FOR THISISMONEY.CO.UK

Updated:

The Covid pandemic has already changed many things, from the face of the High Street, where many stores closed down for good, to city centres, which are no longer populated by office workers eating Pret sandwiches.

But the past year of lockdowns and job losses is also having an impact on people's attitudes towards their hard-earned money: they plan to save more but also take a few more risks with those savings in search of better retrurns.

Nearly two in five Britons plan to save a higher share of their income than they did before the pandemic, with 17 per cent aiming to save 'significantly' more, according to a survey of 4,000 UK adults by Scottish Friendly and the Centre for Economics and Business Research.

Savings boom: More than half of younger people aged between 25 and 34 year old said they plan to save a bigger chunk of their income than they did before Covid, according to a survey

Savings boom: More than half of younger people aged between 25 and 34 year old said they plan to save a bigger chunk of their income than they did before Covid, according to a survey

But saving is set to rise especially among younger people, who have been the worst affected in terms of job losses during the pandemic as sectors like hospitality suffered total shutdowns.

More than half, or 55 per cent, of younger people aged between 25 and 34 years old said they plan to save a bigger chunk of their income than they did before Covid, with 47 per cent of 18-24 year olds also having such plans. 

That compares to less than a quarter (24 per cent) of those aged 55 to 64 years old and 39 per cent in the same age range saying that the pandemic will have no influence on their savings habits. 

Economists say stashing away more cash is a normal reaction to major economic downturns with so-called 'precautionary' saving rising when people experience financial uncertainty or insecurity. 

In the aftermath of the 2008 financial crisis, as well as previous major recessions, the household saving ratio increased compared to the months leading up the crisis, according to the study (see table below).

Household saving ratio before, during and after major economic downturns in the UK

Household saving ratio before, during and after major economic downturns in the UK

Some 39% of Britons plan to save more after the pandemic, of which 17% 'significantly' more

Some 39% of Britons plan to save more after the pandemic, of which 17% 'significantly' more

But what seems different this time is where people are planning to invest their hard-earned cash.  

With savings rates at rock bottom, stocks and shares ISAs and cryptocurrencies seem set to become more and more popular. 

Before the pandemic, the most popular destination for individuals’ monthly savings were current accounts and saving accounts.

A third of all monthly savings were deposited into current accounts but this is expected to fall to 31 per cent after the pandemic, according to the study.

Despite offering low levels of return, popularity of cash ISAs is set to rise marginally from 8 per cent of savings deposits to 9 per cent. 

Investment choices: The table shows the percentage change in the share of monthly savings invested in different products after the pandemic

Investment choices: The table shows the percentage change in the share of monthly savings invested in different products after the pandemic

The share of monthly savings placed into cryptos is expected to rise from 2.6 per cent before the pandemic to 3.2 per cent after the pandemic – a 21 per cent increase.

The share of monthly savings placed into cryptos is expected to rise from 2.6 per cent before the pandemic to 3.2 per cent after the pandemic – a 21 per cent increase.

Investment in the stock market, which offers savers the potential for above inflation returns is also set to rise, with the popularity of stocks and shares ISAs increasing slightly from 4 per cent to 5 per cent.  

But the biggest rise is in cryptocurrencies. 

The share of monthly savings placed into cryptos is expected to rise from 2.6 per cent before the pandemic to 3.2 per cent after the pandemic – a 21 per cent increase.  

People plan to put more of their savings into international shares, UK government bonds and investment trusts. But UK shares and average savings accounts are set to become less popular. 

Kevin Brown, savings specialist at Scottish Friendly said: 'The pandemic contributed to the UK savings ratio reaching an all-time high of 18% in 2020, but what this study also shows is the longer-term affect it will have on Brits saving habits.

'More specifically, it points to a dramatic step-change in the behaviours of younger adults in the UK who are set on maintaining a more regular and more substantial savings habit.' 

He added: 'The pandemic and the subsequent increase in people’s interaction with saving has also influenced the way in which people save. 

'There is evidence that people are thinking more about how to maximise their savings and possibly rely less on cash as it currently offers very little, if any reward.'

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