Australians dipping into savings due to COVID-19
Australians are struggling to meet even a minimum increase in household expenses with many lacking a savings buffer.
Research commissioned by MyState Bank has shown that half of the Australian population does not believe they would be able to afford a $200 increase in their monthly household expenses, and nearly 2 in 5 (38 per cent) Australians did not have an emergency savings buffer in place before the COVID-19 outbreak.
One in 3 (33 per cent) Australians, according to the research, had to dip into their savings to get by during the pandemic, with 1 in 10 estimating they have drained over half of their life savings.
“What started out as a health crisis has been felt in the hip pockets of many Australians across the country,” MyState Bank general manager of customer experience Heather McGovern said.
While lockdown measures have helped some Australians into a better financial position; for others, it has left gaping holes in their household income.”
RFi Group data shows that over 2 in 5 (40 per cent) Australians have seen their income decline due to COVID-19, with an additional 1 in 10 (15 per cent) expecting their income to decline over the next six months.
When asked when they expect their income to return to the level it was at prior to COVID-19, just under 2 in 3 (63 per cent) consumers indicated they expect their income to have returned to pre-COVID-19 level by mid-2021.
However, younger Australians expect their finances to recover more quickly than older Australians.
McGovern also highlighted the impacts of COVID-19 on income allocation, stating that “the economic implications of COVID-19 have caused many households across the country to redirect their savings to the basic necessities, shelving their big financial goals and decisions, at least, for the time being.”
RFi Group data shows that those who have seen their income decline due to COVID-19 estimate that they are allocating more of their income towards necessities, and less towards savings and investments compared to those who have not seen a negative impact on their income.
RFi Group data also shows that Australians with children estimate a higher allocation of their income towards necessities compared to those without children.
In response to the uncertainty of the current economic environment, MyState Bank has launched a new artificial intelligence driven solution built into everyday transaction and savings accounts products, including the mobile app, to help provide customers with insights about their spending and advice on how to save more easily.
MyState Bank is also focused on financial wellbeing, with CEO Melos Sulicich commenting about the revamp of the MyState app in an earlier interview – “I am really pleased that as a small bank we can still provide our customer base that that level of really sophisticated technology… for me, this really sets us apart from other small banks in the country”.
The Commonwealth Bank (CBA) has also recently launched a new app feature to help customers manage their bills following research showing that young Australians are struggling to stay on top of their finances.
The CBA feature called ‘Bill Sense’ will help customers prioritise regular expenses and the app can predict the upcoming bills of customers.
According to RFi Group data, mobile phone banking capability is increasing as a driver of choice for primary transaction account providers, and while not as important to choice as trust or a recommendation from friends or family members, it is an area that is particularly important for young Australians.
RFi Group also forecasts mobile banking to continue to increase as 2020 has seen an upward trend in weekly and daily use of mobile banking.
Anna Shaw is the client insights manager at RFi Group