Rishi Sunak reportedly told an online audience of conservative party members that he “felt good” about the UKs prospects post-coronavirus in late-December. Since March, millions of workers have been forced to work from home where they can and some of these people may have built up savings as their expenses reduced.
The Chancellor addressed these people specifically, noting: “I feel good about the bounceback.
“I think people have been sitting at home, building up some savings hopefully and we would like to go and spend them when we get back.”
If this advice is followed, substantial amounts could be spent as Andy Haldane, the Bank of England’s Chief Economist, recently explained British people have amassed around £100billion of “excess savings” during the pandemic.
Additionally, the Office of National Statistics (ONS) revealed the household savings ratio reached 29.1 percent in the second quarter of 2020.
An all time high that dwarfed the 9.6 percent seen in the first three months of 2020.
While it remains to be seen how these savings will be utilised, Steve Wiley, the Chief Executive Officer of Monva, urged consumers to use their funds to get on top of their financial obligations.
Steve responded to the Chancellor’s suggestions: “While 2020 has been a challenging year for the nation’s finances, lockdown and social restrictions through 2020 has meant that a lucky few have benefitted from reduced outgoings and been able to put more money than usual aside.
“Although many will be tempted to spend this in the new year, consumers should also consider how they can put this extra cash to work, get their finances in order and prepare for whatever 2021 throws at us.”
While some may have built up their savings, many others would have been forced into debt in 2020 and Steve implored savers to address this in the coming months: “Anyone currently carrying debt, whether on a credit card or personal loan, should consider using any extra cash to pay off their debt sooner, and avoid building further interest.
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“This could be done by paying off the balance in full or increasing your monthly payments. “Those whose savings do not cover the entire debt should instead focus their attention on the most expensive debt first: the credit cards or loans with the highest interest rates.
“While those with low interest or zero percent balance transfer products might be tempted to spend or save the cash, repaying any debts sooner – and ideally within the Balance Transfer offer window – could help avoid further financial pain down the road.”
Personal debt is set to be a big problem for many in 2021 even with savings rates being high at the same time.
Recent research from money.co.uk showed that as many as 78 percent of UK adults would have carried over debts into this year.
This would include money owed on credit cards, personal loans care loans, bank overdrafts and payday loans.
Analysis from money.co.uk showed the average British adult ended 2020 with £9,246 in debt but this was down from £13,910 in 2019.
Salman Haqqi, a personal finance expert at money.co.uk, commented on these figures: “Our research shows that it has been a particularly difficult year for the country financially.
“There’s been the coronavirus pandemic, and with it, unemployment and furlough, plus the rising cost of everyday living to consider.
“Yet, despite this, the good news is that people are generally carrying less debt across into 2021 than they did the previous year. However, our study also shows that one in four people are paying off the minimum amount in repayments but less than the full amount on their credit card every month, which will be costing them.
“It’s worrying to see that so many never move their debt around to take advantage of better interest rates, something that could save them hundreds of pounds a year and help them pay off their debts sooner.
“One of the most troubling stats is that 35 percent of people are using debt to pay for household essentials, showing that the cost of living just isn’t covered by their regular income.
“It’s always worth going online and investigating what options are available to you, especially as the new year starts, as there may be cheaper alternatives and strong offers from lenders.”