COVID-19 may be helping Kiwis become better with money
The financial impact of COVID-19 may have a silver lining in helping some New Zealanders become better with money. One group, however, is bucking the trend and showing signs of becoming worse.
Research undertaken by the Commission for Financial Capability (CFFC) between January and June showed an upswing in most people’s knowledge and attitudes around their personal finances.
Respondents were more informed about their KiwiSaver funds, were able to save more, and more were in agreement with their partner on how to spend or save money. Interestingly, more felt better about their financial situation, and were more confident they would have a financially comfortable retirement.
This was true for all age groups except those aged 18-34. Younger people exhibited the opposite behaviour, with the percentage agreeing that they kept a close eye on their financial affairs dropping from 78% in March-April to 70% in May-June, compared to 80% across the total population. Those who considered money was there to be spent shot up from 29% to 42%, compared to 27% of the total, and by May-June 37% agreed they tended to live for today and let tomorrow take care of itself compared to 25% of the total.
The research has been released to mark the CFFC’s annual Sorted Money Week; its theme this year is encouraging people to ask questions about money and turn to its government-backed Sorted site for independent information and tools.
Head of the CFFC, Retirement Commissioner Jane Wrightson, says the research also showed fewer people were embarrassed about talking about their finances, reflected in the flood of money questions received by Sorted since the start of lockdown.
“Many New Zealanders are feeling in the same boat due to the rise in redundancies and income loss,” says Wrightson. “Feeling comfortable talking about money and asking questions is a good thing; it’s the first step on the road to gaining the knowledge and skills to improve your financial situation long term. We’re using Money Week this year to encourage New Zealanders to keep reaching out, and providing a safe place at Sorted where they can receive answers they can trust.”
The CFFC’s financial capability Barometer survey interviewed 500 people a month over six months, then aggregated the 3000 responses into two-month blocks to detect if attitudes and knowledge around money were changing. It found the percentage of people who didn’t know which KiwiSaver fund they were in decreased from 30% in January-February to 23% in May-June.
Wrightson says the steep drop in KiwiSaver balances as the pandemic took hold globally in March may have shocked many account holders into paying attention to their fund for the first time.
“New Zealanders realised their KiwiSaver was not just a savings account, but also an investment fund, and had a crash course in how investments can ride a roller coaster depending on world events.”
The survey also found the percentage of people able to save each month rose from 49% in January-February to 54% in May-June, and more people reported having between one and three months’ worth of income to access in an emergency.
“Forced saving during lockdown allowed many of us to see how much we could save when we were spending only on essentials,” says Wrightson. “Talk of redundancies and recession probably encouraged more people to keep saving once lockdown was over.”
Getting through lockdown by spending less was probably behind the increased percentage of people who were confident they would have a financially comfortable retirement.
The percentage of people who thought NZ Super would not be enough to retire on dropped from 50% to 42%.
Wrightson said the forced saving during lockdown may also be behind the surprisingly high number of people who reported feeling better off – those who subjectively placed themselves in the highest financial wellbeing category increased to levels not seen since the Barometer survey started in 2017, rising from 46% in January-February to 52% in May-June.
“Perhaps we realised how little we could live on and still be content. Some might be in a tight financial situation, but when they compared themselves to others, and to people in countries that have not contained the pandemic, they felt better off.”
A greater percentage also felt in control of their financial situation most or all of the time. Wrightson said having a sense of financial control contributed to wellbeing.
It was concerning, however, that young people reported their spending and financial behaviour had deteriorated after lockdown in contrast to the rest of the population.
“This may be a reflection of younger workers bearing the brunt of job losses and income reduction. Their ‘live for today’ attitude is likely coming from the current uncertainty. It’s important we recognise this and help younger New Zealanders imagine a better future for themselves.”
She hoped this year’s Money Week theme would encourage people to continue asking questions about money, take a long-term view and talk with their partners and wider family about topics such as KiwiSaver, spending plans and tackling debt.
Impartial information, guides and tools could be found at sorted.org.nz
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