Cash savings increase during pandemic, but 21% of households saved less than $ 1,000

Despite the financial impacts of the COVID-19 pandemic, new research has revealed that the level of “financial comfort” experienced by many households, including household savings balances, has in fact improved over the past year. the last year and a half.

That was the headline of ME’s latest biannual Household financial comfort report, which provides an overview of Australia’s financial positions based on a survey of 1,500 households conducted in June.

While the latest report does not capture the effects of the prolonged shutdowns that have occurred in Sydney and other parts of the country since the end of June, it does show that household comfort levels increased between December 2020 and June 2021.

ME’s household financial comfort index for June 2021 reached 6.04 (out of 10 possible), which is 3% higher than the December 2020 score and 8% higher than before COVID-19.

“Despite the phasing out of most government financial aid COVID-19 during the first half of the year, several factors have bolstered households’ sense of wealth and comfort with their finances,” said Jeff Oughton, economist – advice from ME.

“These include rising investments such as the real estate market, slightly higher average incomes in a recovering labor market, and more conservative spending and saving behavior. For most households, their comfort has even rebounded significantly higher than pre-pandemic levels.

“Of course there are still sections of the population, for example single parents, precarious workers, including casual workers and odd jobs, unemployed and self-employed Australians, who don’t feel so out of touch. financially well off. These groups are very sensitive to changes in government support and the ongoing turmoil during Australia’s economic recovery. “

Prudence in spending leads to increased savings

The ‘comfort’ levels of households with cash savings reached their highest level ever in June, according to the report, with many Australians continuing to take a cautious approach to their finances.

58% of households said they are currently spending less than they earn, which is significantly higher than the 48% of households who reported doing the same before the pandemic (as of December 2019).

As a result, households reported saving an average of $ 960 per month, which is $ 110 / month more than ME’s historical average.

In terms of savings account balances, almost a quarter of households (22%) have cash savings of $ 100,000 or more. And while that number has not budged for six months, it is five percentage points above December 2019 levels, representing the largest increase during the COVID period.

Many remain “highly vulnerable”

However, the picture continues to be less rosy for many households.

Although down from pre-pandemic levels, research from ME shows that 34% of households are spending all of their income and are unable to save anything, and an additional 8% are spending more than ‘they don’t win.

And although households with large savings balances were successful in increasing their cash savings during the pandemic, 21% of households saved less than $ 1,000. Worryingly, 9% said they had less than $ 100 in savings.

A quarter of households also reported that if they lost their source of income, they would not be able to maintain their current lifestyle for more than a month – a figure highlighted as the Sydney lockdown is currently in its ninth week and the last one in Melbourne, confinement has just passed the 3 week mark.

“Despite more households saving and greater overall comfort with saving cash, there is still a significant proportion of Australians who remain highly vulnerable to loss of income,” said Oughton.

“With pandemic lockdowns continuing to occur across Australia, households with low cash savings are at significant risk, especially in cases of prolonged strict lockdowns as we are currently seeing in NSW, in Queensland and Victoria. “

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If you have been financially affected by the pandemic and want to know more about the support measures put in place for individuals and businesses, do not hesitate to consult our dedicated coronavirus and your financial guide.