Crisis ha made us smarter with our cash

BY TRICIA PHILLIPS 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.

About 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 per cent.

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.

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 78.5million 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.”

TAKING CONTROL IS IMPORTANT

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 on to 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.

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 per cent, 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 zero per cent balance transfers) and mortgages (rates are really low and that could mean big savings on repayments).

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