Covid-19 reveals importance of emergency savings
The importance of being financially prepared for an emergency is one of the key lessons Kiwis learned from the Covid-19 pandemic, according to a new report from Massey University’s Fin-Ed Centre.
This finding comes from an interim update to a 20-year longitudinal study aiming to understand issues related to the financial knowledge and financial education experience of young New Zealanders.
The main study, conducted at five-early intervals, was launched in 2012 and comprised a cohort of New Zealanders aged 18 to 22 years at that time. The second stage of the study took place in 2017 and the third stage will take place in 2022.
Director of the Fin-Ed Centre Dr Pushpa Wood said that “we especially wanted to check in with the participants of our longitudinal study to explore whether the pandemic has presented any major financial challenges in their lives.”
The recent findings revealed that most of the participants have high levels of financial resilience, with more than 60 per cent of participants reporting that they could live off their savings for three months or longer if necessary.
Associate Professor Claire Matthews says a key lesson from the pandemic on the importance of being financially prepared for an emergency; “is an essential message for all New Zealanders”.
The impact of COVID-19 on household finances between March and November 2020 was not significant for many participants, with approximately 60 per cent of the participants reporting household income and expenditure remaining the same.
“It is interesting to note that although they did not encounter a reduction in their income but they did not report noticeable reduction in their household expenditure either.” Says Dr Wood
However, 30 per cent indicated that they, or their employer, accessed financial support during this time with the Government wage subsidy as the main financial support mechanism used.
Participants also highlighted the insights gained into their spending habits during the lockdown period, with 20 per cent reporting that expenses had decreased in this period.
“Understanding how we manage our money, including our spending habits, is an important part of being able to improve our personal financial management leading to better financial outcomes,” Dr Matthews says.
In general, participants of the study are satisfied with their current financial situation and are optimistic about their future financial position in the coming year.
Massey University’s Fin-Ed Centre aims to improve New Zealanders’ knowledge, attitudes and behaviour towards money matters. The Fin-Ed Centre undertakes a variety of teaching and research activities to improve the quality and access of financial education. Key projects, among others, include a 20-year longitudinal study tracking 300 New Zealanders over time to better understand the need for ﬁnancial knowledge at different life stages. This report is a periodic update to the Longitudinal Study.
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Created: 04/05/2021 | Last updated: 04/05/2021
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