Turning Lockdown Savings Into Investments
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
How has the lockdown period treated your finances? Undoubtedly Coronavirus has been a health and economic hardship for many, but it is also true that many in society found that they were able to save more money in the past three and a half months.
Working from home for those fortunate enough to still be working meant that salaries stayed the same, but all the expenses of commutes and networking were gone. As for weekend leisure, for most of us this didn’t extend past Netflix. The result has been somewhat of a personal finance windfall, a payrise in effect as earnings stayed the same while spending froze.
Doing more with your money means turning these savings into investments. Here’s a theoretical look at some of the areas of savings, and what these could potentially be worth as investments.
Whether you drive, take the bus, or get the train, you’ll know all too well how the cost of a commute adds up over a month.
If you spend around £50 a month on petrol for commuting, that’s £150 you could invest today based on lockdown savings. That £150 could be worth £181 in five years based on an assumed 5% annual growth.*
As well as not being stuck in traffic for an hour every day, and as well as helping the environment, you’ve also helped your personal finances if you’ve invested your commute savings. Could you make this a savings habit and cycle to work when lockdown ends?
You’ve no doubt missed your nights out, but what you’ve probably not missed is the dread of seeing what you’ve spent the night before.
A Saturday night at a restaurant can easily set you back £100, so just three nights out a month is a £300 hole in your personal finances. Realistically, many of us could have saved close to £900 by eliminating restaurants, bars and other activities from our social calendars this past three months.
Invested in a Stocks & Shares ISA, for five years with an assumed 5% annual growth, your £900 leisure savings could be worth £1,080.*
A big family holiday can cost as much as £3,000 if you were planning on a destination such as a couple of weeks in the USA. However, with UK quarantine restrictions, and many destinations such as the US having their own outbreaks, very few of us have managed to travel anywhere in the past three months.
After the disappointment of missing out on your trip, consider how your holiday savings could perform in an investment. Your £3,000 saving could be worth £3,620 after five years invested in a Stocks & Shares ISA with an assumed 5% annual growth.*
Lifestyle spending on gyms, spas, and hairdressers has been impossible these past few months, with many of us choosing to cut our own hair or do a free online gym class.
Savings on your lifestyle spending including a haircut, frozen gym memberships could amount to £180 over the past three months, which could be worth £217 in five years invested in a Stocks & Shares ISA with an assumed 5% annual growth.*
The Cumulative Impact of Changes
Combine the savings examples above and you’d have £4,230 extra in your bank. As an investment that could be worth £5,098 in five years.*
Left invested for the longer term of ten years or more, and you can see how the impact of the recent lockdown could actually be to your financial benefit. You are growing your original investment, as well as getting growth on growth, the longer you stay invested the more of a snowball effect you can have on your money.
Furthermore, if you choose to make some of the recent changes permanent, such as cycling instead of driving, and keep on investing the savings, you’d be on your way to potentially building even greater wealth for the future.
Do more with your money, unlock a brighter financial future by investing your lockdown savings today.
*The calculations take into account our average annual fee of 1.16% and don’t take into account the impact of inflation, which will reduce returns, and assumes you only make the contributions set out.