Time will tell if so-called Freedom Day leads to a new financial beginning for households, writes Tom Briffitt, senior consultant at MRM.
Intermittent lockdowns and strict social distancing measures gave way to freedom on July 19th when many of the last remaining Covid-19 restrictions were eased.
It may not be ‘freedom’ as we once knew it, as Boris, Rishi and many other Brits pinged by Track and Trace will testify, but it represents a significant step forward nonetheless.
The challenge now will be adjusting to those changes after spending the best part of 18 months holed up at home.
The pandemic has forced us to become more cautious, more risk averse and begs the question: Are people ready to take full advantage of their newfound freedom?
The government is banking on us loosening the purse strings to continue boosting the economy. But when it comes to personal finances, we have become a divided nation.
There are households who have suffered a loss of income and struggled to make ends meet, and those more fortunate, who have been able to take advantage of fewer spending opportunities to pour money into their savings.
Whichever camp people fall into though, it seems unlikely they will want to suddenly change tact by ramping up spending or disregarding a new, regular saving habit.
Thankfully, so far, the economy has rebounded well, but the novelty of being able to eat out, go shopping and travel a little more freely may soon wear off.
The current imbalance between supply and demand is driving up prices and it is reasonable to think that inflation could rise to as much as 4% this year.
If the cost of living goes up quickly, people may well look to sure up their own finances once again.
The findings from the most recent Mouthy Money Index, which involved interviewing nearly 100 readers, found just one in 10 (10%) expect a pay rise in the next 12 months. Incredibly, only 2% anticipate a salary bonus.
If wage growth fails to keep up with the cost of living, then it’s even more likely people will revert to a defensive mindset when it comes to managing their money.
One of the few silver linings from the dark cloud of Covid-19, is that many families have been able to build up a greater savings buffer.
It is understandable that a lot of them will want to enjoy some of that extra cash, but will they embark on a spending frenzy? Or has the pandemic encouraged a sense of long-term frugality?
The next edition of the Mouthy Money Index will provide a useful barometer.
We’ll be exploring how households are balancing spending with saving; Whether big-ticket purchases like holidays and cars on the rise; And how wary people are of rising prices and whether they have enough left in their pocket at the end of each month to carry on spending.
Will old (pandemic) habits, die hard? Or is Freedom Day really a new beginning?