THE FINANCIAL SHOCK OF COVID SEES SWITCH TO ONLINE BANKING

THE Covid-19 pandemic has hit many families’ finances hard – but it has also made people realise how vital it is to take control and understand money matters better.

The good news is the crisis has led to six in 10 people becoming more aware of their finances, rising to seven in 10 of those furloughed from their jobs. Around a third said they had improved their financial knowledge.

Research from credit data firm Experian found younger people aged 18 to 24 years were the group most likely to have developed their financial literacy in lockdown, at 50%.

Almost a third of people have researched financial information to help them manage their money and they are twice as likely to have contacted at least one lender to discuss options around reducing their bills, compared to a national average of one in 10.

Meanwhile, more than a third of people said they were able to save more money during lockdown than normal because despite reductions in wages, their costs for transport, socialising and non-food shopping had dived.

James Jones, head of consumer affairs at Experian, said: “The pandemic has caused financial difficulties for many. People are looking hard at how best to prepare for the potential economic challenges ahead by taking more control of their finances.”

The virus has also had a huge impact on the way we bank and pay for things, with large numbers of people getting to grips with online banking and contactless payments to minimise their contact with others.

Research by Nationwide building society reveals a third of people polled had used lockdown to try online and mobile banking for the first time – and that includes many of its older customers. Also, around a quarter of people had gone at least two months without using cash – its members made 78.5 million contactless payments from March 23 to May 31.

This brave new world where cash is no longer king can also help people to take better control of their finances as they are able to check bank statements and make payments 24/7. Mark

Nalder, head of payments strategy and service at Nationwide, said: “As lockdown restrictions continue to ease, it is evident the pandemic could have a lasting impact on how people pay for things.

“A shift towards mobile payments and online banking means it will help people keep track of their spending and better manage their money.

“Regardless of what happens in the future we will continue to provide choices of ways to pay that meet our members’ needs.”

When people are struggling with money they tend to not open bank statements or keep a close eye on their balances. But without knowing where you stand – how much you have coming in and going out – you’ll end up in a muddle and things could spiral out of control. Setting up a simple ‘In and Out’ budget for your finances will show you exactly where your money goes so you can work out if you can make savings in any areas.

If you don’t monitor your bills you may miss out on the chance to make savings when contracts are up for renewal. There are no rewards for loyalty, financial firms rely on apathy so they can automatically move people onto their (typically expensive) standard rates when deals end.

Why pay more for your energy than you need to? You’re not getting better quality gas or electricity.

But that’s precisely what happens if you don’t find a new tariff at the end of a deal and you get put on a standard variable tariff.

It’s the same with insurance, by switching and ditching you get the best deals and keep your costs down.

QA lot of people seem to be taking mortgage holidays at the moment. Am I able to make overpayments on mine? I have a little bit of extra cash because I’m not commuting to work.

AYes. Most lenders let you pay up to 10% extra off the balance each year without penalty. Either make a lump sum payment or increase your monthly amount. Contact your lender for details. Even small overpayments can make a big difference to the amount of interest you pay and will reduce your mortgage term.

While savings interest rates are pathetic at the moment the interest being charged on debt is expensive. The average for credit cards is 18.9%, and many people are paying way more than that. If you can afford to pay a little more each month, do it. You’ll chip away at the debt, paying it off quicker and cheaper.

Instead of taking a payment holiday, ask if there’s a cheaper product you can switch to for loans, credit cards (there are still 0% balance transfers) and mortgages (rates are really low and that could mean big savings on monthly repayments).

The pandemic crisis has reinforced the message that we all need a financial safety net to fall back on in tough times. Coronavirus hit us out of the

What’s the difference between a direct debit and a standing order?

A standing order is typically set up by the account holder to pay a fixed amount each month, while a direct debit is set up by a company and the amount can differ each time. For instance, if you agree to pay your credit card by direct debit and repay a percentage, or all of your balance each month, the credit card provider will change the amount taken by the direct debit dependent on your spending. blue, leaving many people unable to keep on top of their bills. Those with savings will have been able to cope with much less stress. If you have got a little extra cash, put it away in anticipation of tough times ahead.

Emergency savings of at least three months’ worth of bills, preferably six, will give you peace of mind. Also, once you start saving it becomes addictive. You don’t need to save huge amounts, start small. Every pound you save up saves you that pound plus interest when you need access to money.

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Third of those polled by Nationwide had used online banking for first time

Keeping an eye on your credit report is a vital part of staying in control of your finances. One reason is so you can spot early signs of fraud.

If your score is low you can take steps to improve it – and that means getting access to cheaper credit in the future. And those people looking for credit should check their score before applying so they’re in the strongest position to get a good deal.

QI’m retiring in the next couple of months and with my predicted state pension and private pension I will be earning more than the personal tax allowance. Will I now need to fill in tax returns each year?

AUsually HM Revenue and Customs will send a tax code to your personal pension provider to deduct any tax you need to pay from your pension income at source, which is similar to the system for those on PAYE, so you shouldn’t need to fill out self-assessment tax forms.