COVID prompts Australians to rethink financial goals

More Australians said they will prioritise reaching a savings goal overtaking a holiday in the next 12 months, as Australia prepares to emerge from months of lockdown during the COVID-19 pandemic.

According to the Financial Planning Association’s (FPA’s) annual Money & Life Tracker: Freedom Edition which surveyed 2,000 Australians, 52.4% plan to hit a savings goal and 44.4% plan to go on a holiday.

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.

• 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

The FPA research has been launched as part of Financial Planning Week and provides and is intended to provide a snapshot of issues Australians are facing, particularly with respect to COVID-19.

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).

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).