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Coronavirus has forced many families to adapt financially as a new normal took hold of the economy. Throughout 2020, more people than ever applied for state support through Universal Credit and other new schemes to stay afloat and on top of this, others may have had to seek help from borrowing from family or taking out costly credit deals.
KIS Finance looked into these financial difficulties recently by conducting a survey of 2,000 adults and examining data from the ONS, FCA and UK Finance among others.
Within their research, it was found 45.5 percent of people have taken out credit solely because of the pandemic, with the following insight also being revealed:
- 25.8 percent went into an arranged or unarranged overdraft
- 15.5 percent took out an additional credit card
- 10.5 percent received financial help from family or friends
- 7.7 percent took out a personal loan
- 6.4 percent had to sell assets
- 5.2 percent took out a payday loan
Additionally, KIS Finance examined which generations of people have been hit hardest by coronavirus.
According to their findings, the percentage of people in each age group who have had to take out some form of credit, borrow money from family or friends, or sell assets because of the pandemic are as follows:
- 18 – 24 year-olds: 59 percent
- 25 – 34 year-olds: 66.1 percent
- 35 – 44 year-olds: 63.6 percent
- 45 – 54 year-olds: 38.7 percent
- 55 – 64 year-olds: 23.6 percent
- 65+ years old: 16 percent
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Young adults, even where high cost credit is not needed, are continuing to struggle with their finances, as additional research from Fidelity International found that recent events have forced up to 78 percent of people in their 20s to dip into their savings to cover day-to-day expenses, compared to 60 percent for the general population.
Maike Currie, an investment director at Fidelity International, commented on these findings while providing suggestions on what struggling consumers could do: “Months of uncertainty have left many households facing very real financial challenges, with little choice but to rely upon their savings to cover the cost of daily essentials.
“The disruption caused to financial routines will not only have seen them forced to sacrifice savings goals but caused significant stress and anxiety – no-one likes the idea of dipping into their emergency funds.
“If you are in the position of having to rely upon your savings, it’s important to review your overall financial position before you make any decisions.
“Consider the savings pots you’ve created for your goals, both short-term and long-term, and which are the most essential to your financial future.
“Goals such as retirement may seem a long way off, but the decisions you make now can affect your plans in the future.”
Maike concluded: “For those who have found themselves in a more fortunate position and saved money during the past few months, this could be a good opportunity to strengthen your savings.
“It’s worth thinking about how you use this to maximum effect for the future.
“For example, putting an extra one percent of your monthly salary into your workplace pension each month can make a real difference in the income you’ll have in retirement.
“This relatively small sum – which may be equivalent to what you’re saving through lifestyle changes at the moment – will have time to grow and ensure you’re on the right road to achieving your retirement goals.”
Given the ongoing economic problems of coronavirus, Rishi Sunak and the wider government have been forced to extend a number of support measures into 2021.
As the new year approaches, savers and consumers can still benefit from mortgage and credit payment holidays, furlough and self-employment grant schemes and other measures should they be needed.
Additionally, impartial financial guidance can be sought from the likes of Citizens Advice, the Money Advice Service and the Money and Pensions Service.
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