Day-to-day spending is different during the Coronavirus pandemic, with many feeling they are saving a little more and spending less while in lockdown; however, households are experiencing divergent consequences: those with savings are likely to be saving even more now, while those without, are just as likely to be saving less.
Money management impacted
In the face of the uncertainty imposed by the Coronavirus, people across Europe are being careful with their money. Many self-report actively changing their daily spending and saving activities.
According to the latest ING International Survey, 55% of Luxembourg residents say they are now spending less due to the Coronavirus, while 41% say they are saving more. These changes will have been driven by both necessity and choice. While some are no longer working, and so actively limiting their daily spending due to reduced earnings, others are finding they have more left over at the end of each week simply because they do not have the opportunity to go out and spend.
Even with perceived day-to-day shifts, there have been no significant changes in average self-reported household saving levels. The number of people who report having no savings has remained quite stable in Luxembourg - 8% in May 2020 compared to 13% in December 2019. We have asked this question annually for the past eight years and it consistently fluctuates around 12%.
However, aggregate values mask some important discrepancies. For example, it is the 13% of households with no reported savings, and the 17% of those with savings, but less than the recommended three months’ worth of take-home pay, who are now more likely to say they are saving less due to coronavirus. This group is vulnerable to adverse financial shocks.
So, while the lockdown may have presented opportunities for some to increase how much they save, others have suffered financially which has impacted how much they can put aside each month.
Luxembourg’s savings comfort best in Europe
Despite the unequal financial impact of coronavirus, the self-reported changes in saving and spending may have led some to feel more comfortable with what they have saved. Our questions comparing attitudes before and during the coronavirus pandemic showed a drop in the percentage of Luxembourg residents who say they would need either much more or a little more savings to feel they were in a comfortable position (63% to 49%). Luxembourg leads the European table in savings comfort!
Putting savings aside supports financial flexibility, which is critical when facing relative uncertainty, such as that associated with the spread of coronavirus.