Cash savings rise during pandemic, yet 21% of households have less than $1,000 saved

Despite the financial impacts of the COVID-19 pandemic, new research has revealed that the level of ‘financial comfort’ felt by many households, including household savings balances, has actually improved over the past year and a half.

That was the headline takeaway from ME’s latest bi-annual Household Financial Comfort Report, which provides a snapshot of Australian financial positions based on a survey of 1,500 households conducted in June.

While the latest report doesn’t capture the effects of the extended lockdowns that have occurred in Sydney and other parts of the country since late June, it does show that household comfort levels rose between December 2020 and June 2021.

ME’s Household Financial Comfort Index for June 2021 hit 6.04 (out of a possible 10), which was 3% higher than the December 2020 score and 8% higher than before COVID-19.

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

“These include rising investments such as the property market, slightly higher average incomes in a rebounding job market and more conservative spending and savings behaviour. For most households, their comfort has even bounced significantly higher than pre-pandemic levels.

“Of course, there are still sections of the population, for example single parents, insecure workers including casual and gig economy workers, the unemployed, and self-employed Australians, who aren’t feeling as financially comfortable. These groups are highly susceptible to changes in Government support and ongoing turbulence during Australia’s economic recovery.”

Spending caution leads to savings surge

According to the report, levels of household ‘comfort’ with cash savings reached the highest point they’ve ever been in June, with many Australians continuing to take a cautious approach to their finances.

58% of households reported that they were currently spending less than they earned, which is noticeably up on the 48% of households who reported doing the same before the pandemic (in December 2019).

As a result, households reported that they were saving an average of $960 each month, which is $110/month higher 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 figure hasn’t budged in six months, it is five percentage points higher than December 2019 levels, which represents the greatest increase during the COVID period.

Many remain ‘highly vulnerable’

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

While down on pre-pandemic levels, ME’s research shows that 34% of households are spending all of their income and are not able to save anything, and a further 8% are spending more than they earn.

And though households with significant savings balances have managed to increase their cash savings during the pandemic, a considerable 21% of households have less than $1,000 saved. Worryingly, 9% reported to have less than $100 in savings.

A quarter of households also reported that if they lost their source of income they wouldn’t be able to maintain their current lifestyle for more than a month - a figure put into stark reality given that Sydney’s lockdown is currently in its ninth week and Melbourne's latest lockdown has just hit the 3-week mark.

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

“With pandemic lockdowns continuing to occur across Australia, households with low cash savings are at significant risk, especially in instances of extended strict lockdowns like we’re currently seeing in New South Wales, Queensland and Victoria.”

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If you’ve been impacted financially by the pandemic and want to learn more about the support measures in place for individuals and businesses, then feel free to check out our dedicated coronavirus and your finances guide.