When you made your New Year’s resolutions back in January– saving more money might have been on your list. But did you actually believe that 2020 would be the year you’d save more? Well, turns out, all it took was a global lockdown and strict government regulations for everyone to find their inner money saver.
This year, everyone had to make some sort of adjustment—and one of the most prominent adjustments we’ve had to make, has been changing our budgets. For the past few months, spending habits across the globe changed almost overnight. There was no more getting after-work drinks with colleagues, holidays were cancelled, no more shopping trips, working from home helped you to save money on your commute, and if you’re a millennial, you didn’t go out on weekends to spend money on experiences. Instead, you redirected some of that money to spend on groceries, electricity, and perhaps home entertainment and Uber eats.
But even with this shift in spending, there’s one sector that’s been given new attention by our consumer-driven society: saving.
Due to lockdown regulations and normal spending avenues being unavailable, saving was suddenly a lot easier than it normally was. In a recent survey done by TD Ameritrade, more than two thirds of 1,000 Americans surveyed said that they’ve found ways to cut back on expenses during the last couple of months. And quite simply put, if you can’t go out to spend money, staying home and saving money becomes a lot easier.
Aside from the lack of expenses, the challenging times we’re living in also contributes to people’s new-found tendency to save rather than spend. With uncertainty regarding employment, remuneration, and quite frankly, life in general, people are decreasing their spending and saving instead. Because of the uncertainty, and the unsure circumstances, we’re holding on to our money rather than spending it like we did back when life was ‘normal’. This change in behavior could have us come out of this year being risk-averse and savings-obsessed.
Many view this as a good thing. Young people all over the world are behind when it comes to financial milestones and having smarter savings habits could help them get ahead. In the US, millennials and Gen X save less than 10% of their salary, or nothing at all. In Latvia, more than 45% of millennials are not saving up for retirement. And in Spain, where millennials have to spend roughly 50% of their salary on rent, saving seems a far off distant dream, rather than an actual goal.
What about the economy?
It’s no secret that we’re heading for a global recession, and with consumers aimed at saving rather than spending that could lead to an even slower increase in GDP growth. But in the long run, that could be good news for the economy. By having a slower, steadier growth rate and citizens that are financially more secure due to smart saving habits, the global economy might be able to handle shocks better in future, and be a stronger financial society overall.
Old habits die hard
Of course, some experts believe that this rise in spending won’t necessarily stick around forever. Once we have a form of normal life again, people might revert back to their pre-lockdown ways. This is especially possible when the things we’ve been depraved of for so long; travel, going out, getting our favorite cappuccino and going on trips, are available and safe again. But, after the initial return to a normal life, perhaps people will decide to continue to prioritize their savings and investments.
Saving and investing
Saving can feel easier and more achievable if you commit to small, consistent payments into a savings account every month. Although this is a low risk way of saving, the yields on your account might not be very lucrative. That’s where investing can be more rewarding.
Although investments always come with some form of risk, you can opt for a lower risk investment option that still yields stable net returns. With a product like Go & Grow where you can get up to 6.75% return p.a.* you can enjoy your life, while your money continues to work for you at a higher return rate and without much input.
Going back to ‘normal’
So as the world slowly opens up again, make a real effort to keep the healthy spending and good savings habits you’ve developed these past few months. Saving is an essential part of obtaining financial freedom. And by making saving a priority, you can feel more secure in your financial future. If you decide to invest your savings wisely, you could be well on your way to a financially healthier and wealthier you. Make 2020 the start of the rest of your best financial life.