The coronavirus pandemic has resulted in people becoming more cautious with their spending, according to a new survey that also shows that some people are eating into their emergency funds.
Between May and September there was a 14% drop – from 35% to 21% – in people who felt it was not the right time to splash out on large purchases like furniture or electronic devices – showing a cautious approach to household money management.
The ĠEMMA Pulse Survey on Household Money Management – September 2020 looked into the spending and saving habits of just over 400 households. It was carried out between August 31 and September 9.
“We want to see if there is a change in behaviour and if this will be carried forward when the ‘norm’ returns. This will give us intelligence on the extent of policy measures needed to secure a more permanent long-term behaviour,” said David Spiteri Gingell, team leader of the ĠEMMA financial- capability education platform, which falls within the Ministry for the Family.
He said the study showed that future planning for emergency situations shifted positively but there are still many people whose reserves last less than a month.
There is more of an understanding that this may be for the long-term
The data showed changes in emergency funds. Literature says it is ideal to have at least three months’ worth of salary saved up to have a reasonable cushion, he said.
However, 36% of respondents indicated having funds to last them more than three months – a figure that decreased from 47% in April and 44% in May.
“What COVID has shown us is that when we talk about a rainy-day fund, we think about a normal emergency like replacing the clutch of our car. Now within the context of COVID, it takes on a more strategic dimension, as a bad situation results in people digging into their reserves over a longer term,” he says.
Almost half planning to save
A look at the findings showed that, when asked if they plan to save for a rainy day given the COVID-19 experience, 45% said “yes” – this was up from 36% in April but down from 48% in May.
Those who said they would save, said they would spend less on discretionary expenditures (63%), followed by being careful not to waste (47%), delaying spending on major items like cars and travel (17%), and economising by buying cheaper brands (10%).
Spiteri Gingell said: “In April, people were very cautions as there was a lot of uncertainty about means, with some not knowing if they had a job or if they would benefit from the government wage supplement. In May, we saw a transition to a more optimistic perception at a time when COVID-19 seemed under control. In the September survey, people are not as pessimistic as April but there is more of an understanding that this may be for the long-term,” he said. But household money management behaviour may change in upcoming surveys given the spike in positive coronavirus cases since August.
Just over half managed to save over the past three months, consistent with the past two surveys.
This shows, according to Spiteri Gingell, that the coronavirus situation impacted lifestyle changes as this led people to stay home more, therefore spending less on things like fuel.
Asked about their daily living expenditure, 46% indicated their daily expenditure remained the same while 24% indicated that it increased.
Spiteri Gingell added that a concern highlighed by these surveys is that COVID-19 has had minimal impact on household budget management. Pre-COVID budget behaviour, as shown in a 2018 survey, showed only 38.3% carried out households budget. The September survey showed only 42% of households budgeted during the pandemic.
One surprising, positive result was that 20% of the respondents said they have a personal private pension. And 43% of respondents who have a pension said they intend to increase their level of investment in their retirement plans.