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Saving money trumps taking a holiday: COVID gives Australians a financial health check

Financial Planning Association’s (FPA) annual Money & Life Tracker: Freedom Edition reveals a snapshot of how 2,000 Australians have fared since COVID. A majority of Australians’ top financial goal over the next 12 months is to hit a savings goal (52.4%), followed by going on a holiday (44.4%).

Since the launch of the inaugural survey last year, 26% of Australians have made some changes to their financial situation and 11% feel in a much stronger financial position.

Research marks the start of Australia’s 21st Financial Planning Week (4-9 October), designed to inspire Australians from all walks of life and ages to consider their personal finance.

Australians are making some healthy financial choices as they endure a challenging second year of the COVID pandemic, with more Australians prioritising hitting a savings goal over taking a holiday in the next 12 months as the country prepares to emerge from months of lockdown.

The surprising result highlights a silver lining from the global pandemic as Australians choose to take a financial health check and focus on getting the basics right: reducing frivolous spending, increasing savings, paying down debt and creating a budget.

Marking the start of the 21st Financial Planning Week in Australia (4-9 October), FPA’s annual Money & Life Tracker: Freedom edition, provides a snapshot of the money and life issues Australians are facing 18 months since the COVID-19 pandemic started, how this period of time has impacted people’s financial situation, and what they have done to better manage their money.

Conducted in September, the survey revealed that 35% of Australians said their income and ability to work was affected by lockdowns, while a similar total (34%) said they did not have enough savings to get through lockdowns, or did not know.

Yet compared to this time last year – 11% of people said they were now in a much stronger financial position, and 26% said they had made some changes to their financial situation.

The research shows many Australians have stayed focused on their newly adopted financial habits which kicked in during 2020 and have gathered pace 2021. Amongst the biggest changes made in response to the pandemic, the number one change people reported was to ‘be more frugal about my lifestyle choices’ (44.7% in 2021 vs 30.8% in 2020), followed by ‘increased my savings’ (43.9% in 2021); ‘paying down my debts’ (41.3% in 2021 vs 23.3% in 2020); and ‘created a budget to understand what I’m spending and saving’ (38.6% in 2021 vs 23.2% in 2020).

Those who hadn’t made major changes also said in hindsight, some basic financial planning could have helped them be in a better financial position: 9% said ‘having a financial plan’ would have helped; 23.6% said ‘working on my savings earlier’; 18.2% said ‘not splashed money on take-aways and non-essential items’; and 13.4% said ‘focus on paying down debt more quickly’.

Interestingly – more men indicated they would’ve had a financial plan in place (11% men vs 9% for women) whereas more women have indicated not splashing as much money on takeaways and non-essential items (16% men vs 21% women). Further, women prioritised making a budget (43% women vs 34% men) and being more frugal (50% women vs 40% men). Men were also more likely to prioritise increased savings (47% men vs 41% women), salary sacrifice into super (15% men vs 11% women) and investing more outside of super (25% men and 12% women).

Focus on financial basics a prelude to professional financial advice

Dante De Gori, CEO of the FPA said the financial health check forced on Australian families nationwide posed a unique opportunity for Australians to better understand their finances and take more control of their financial future.

A key goal of the FPA is to encourage a wider range of Australians to improve their financial well-being through seeking professional financial advice.

“Financial Planning Week is all about inspiring Australians from all walks of life and ages to consider their personal finances and find out how having a financial plan will give you greater peace of mind and security.”

“This year’s edition of Money & Life Tracker has shown us almost a quarter of Australians did not have enough in savings to support themselves through the lockdown period.”

“However, the value of financial advice has clearly risen in the eyes of those facing significant challenges and uncertainty. Our research findings from 2020 showed those who had a financial planner by their side were able to cope more confidently than those who didn’t. In light of this, we encourage as many Australians as possible to take stock of their circumstances and explore how a qualified financial planner could help them.”

Research findings show there has also been an increase in Australians seeking professional financial advice and having a financial plan in place. Further, 6.5% of Australians are embracing digital platforms to receive advice.

A majority of Australians maintained a DIY approach to their financial health with 88% feeling they can only trust themselves or their spouse / partner with their financial accountability. Nearly 12% are holding back from engaging a financial planner because they think that they don’t have enough assets or investments to engage one.

“Coming out on the other side of the pandemic, there are a lot of key learnings for Australians on how to better manage their financial situations. Like how you would seek legal advice from a lawyer, get regular health checks from a doctor, we recommend seeking professional advice on your financial situation from a qualified financial planner.”

“It’s great to see financial planners guiding thousands of everyday Australians through the financial stress created by the pandemic. As the lockdowns persist, demand for financial advice has surged, with 2.6 million non-advised Australians intending to seek help from a financial planner in the next two years. This figure is up significantly from 2.1 million in 2019, and double the levels observed in 2015,” Mr De Gori added.

Of those Australians with a financial planner, the majority are 45-54-years old, the phase of life where they are actively looking towards their retirement goals. The majority of this group (9.8% of the total survey) have sought financial advice for between 1 and 3 years; and are skewed towards males.

Cautious optimism on the road to recovery

There are reasons for cautious optimism as 17.8% of Australians believe the country is on the road to recovery, compared to 9.3% last year. Further, fears about whether a recession will be worse this time around have decreased by 4.1% compared to last year.

When it comes to top financial goals over the next 12 months, a majority of Australians prioritised hitting a savings goal (52.4%), while going on a holiday (44.4%) and paying off their mortgage (32.4%) were next. The majority of Australians prioritising hitting a savings goal are in their wealth accumulation phase: 35 – 44 years old. Further, this age demographic is leading the way when it comes to investing in the stock market particularly for men (18% compared to 14% women).

“Australia is soon entering a new year of ‘living with COVID’ and it’s promising to see a number of Australians are currently seeking advice from a professional financial planner or through a digital platform. Financial Planning Week is the perfect time for you to think ahead and create a plan to improve your financial wellbeing – now and into the future,” concludes Mr De Gori.

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