Financial confidence a silver lining of pandemic for most - research

Piggy bank question mark.
Jane Wrightson, Head of Commission for Financial Capability (CFFC) and retirement commissioner, said that among most people surveyed, attitudes towards money have improved. Photo credit: Getty.

The COVID-19 pandemic has helped some, but not all Kiwis manage their money better, new research shows.

A Commission for Financial Capability (CFFC) survey of around 3000 people (500 per month) in the six months to June showed that attitudes to money have progressively improved.

Aggregated into two blocks: March-April and May-June, the results show that in the latter period, people felt more confident about retirement, with less people (23 percent) not knowing what KiwiSaver fund they were invested in. 

But for 18-30 year-olds, the research shows the opposite. Those that kept a close eye on their finances dropped from 78 percent to 70 percent, and 42 percent thought their money should be spent rather than saved - an increase from 29 percent. 

People in this age group were much more likely to 'live for today', with 37 percent agreeing with this statement, compared to a quarter of total respondents.   

Head of Commission for Financial Capability (CFFC) and retirement commissioner Jane Wrightson called the deterioration of spending and financial behaviour of young people "concerning". 

 "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," Wrightson said.  

Over the six months, peoples' ability to save improved slightly, from 49 percent in January/February to over half (54 percent) in May-June. Although March saw KiwiSaver balances take a hit, it gave people a better understanding of investment markets.

"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," Wrightson said.

Getting through lockdown by spending less was the likely reason why more people felt confident about retirement.

"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," she explained.

A greater percentage also felt in control of their financial situation most or all of the time, a factor which contributes to overall wellbeing.  

Dr Pushpa Wood, director of financial education at Massey University, said in addition to being creative, community-minded and kind, the COVID-19 lockdown taught people how to "manage on very little".

Bought coffee and lunches, dining out and movies were among the things that people knew they could live without, said Dr Wood. She encouraged Kiwis to make a deliberate effort to resist impulse buying and cut out - or cut down - on non-essentials.

"Keep the good habits formed during lockdown, [know] what is absolutely necessary (a need) and what you can live without (a want)," Wood advised.

COVID-19 highlighted how financially unprepared many New Zealanders were to cope with a 'financial shock', such as job loss or decline in income.  As a nation, we tended to spend to  capacity rather than save regularly.

"Regular saving doesn’t have to be big amounts: it's about having a mindset that prepares us for three things – not spending every dollar we have, saving some (even very small amount) for tomorrow and not spending the money we don't have," Wood added.

People could build a rainy day fund by identifying "money leaks" and plugging them. Spending can be tracked using a free 'money tracker' app, or keeping a spending diary.

"I use a b5 notebook and record my sending on a daily basis and analyse on a weekly basis – total money spent, how much was on needs vs wants," Wood added. 

As part of CFFC's annual 'Money Week', Kiwis are encouraged to ask questions about money, to reach out for help and advice and use the tools and information available on Sorted.