Last of the big spenders? How Covid prompted a new frugality

One of the many changes lockdown has wrought in me is that I’ve grown to dislike spending money. Previously, I was pretty free with it. I managed to keep my head above water, my account in the black, but not by much. I would happily buy takeaway coffees for £2.80, Pret lunches for close to a tenner, and £9 glasses of wine at wildly overpriced bars. Throw in train and tube fares and the occasional taxi, and a day at the office could easily cost £50 or more.

Come lockdown in March, all that changed. I was suddenly accumulating money rather than frittering it, and it was a nice feeling. But at some point in the past nine it started to become something bordering on an obsession: lockdown has turned me into a miser. Maybe I’m anxious about the rainy days ahead; maybe I’m worried about how fragile everything seems with the pandemic and Brexit and a government that is clearly out of its depth. But whatever the reason, I’ve become Scrooge-like.

I don’t travel any more. Even when the shops briefly reopened, I didn’t buy any clothes, preferring my pair of disintegrating tracksuit bottoms. I now quite often make do with toast for lunch – I am trying to lose weight, so the twin aims of physical and financial health neatly cohere. Having started drinking more at home in the early part of lockdown, I have now virtually given up completely (those twin aims again). While the thought of spending £8 in a cafe on smashed avocado and an overcooked poached egg fills me with something close to horror. And my poor mother will be getting fewer Christmas presents this year.

Is it just me? Guardian Community put out a call to readers to ask how lockdown had changed their spending habits. Are we really becoming more driven by needs than by wants, and is this change likely to alter society in the long term? After all, Britain’s lop-sided economy relies on expensive haircuts and pricey lunches to sustain itself, so what happens if we fall out of love with them?

The first thing to say, of course, is that for some people this is not a lifestyle choice. Those who have lost their jobs or been put on furlough have had no alternative but to start counting the pennies. Juliet, a 54-year-old receptionist for an oil company in Aberdeen, was initially furloughed, but then in July she was made redundant along with 18 of the company’s other support staff. “It’s meant a complete change,” she says. “I write down all my expenses and budget and plan. I shop in cheaper supermarkets and make things last. I make dinners from scratch, then freeze them. I had a bad Amazon habit, which has had to change. It’s amazing how much you can cut back when you have to.”

“I was furloughed throughout the first lockdown, was brought back working only two days a week, then have been furloughed again for the second lockdown,” says Gareth, a 49-year-old designer based in Devon. “I’ve been trying to spend less to match my reduced income, but it’s been difficult. I took my car off the road in April to avoid taxing it, and as the kids have been unable to do their usual sports club activities, we’ve saved on that too. I worry a lot more about money, and what will happen if I lose my job.”

These are economies born of necessity. But what was striking from the replies was that even those fortunate enough to hang on to their jobs have been cutting back. In part, this is because shops and hospitality venues have been closed. In part, it reflects fear for the future. But there also seems to be a new mood that this is no time for excess. The furloughed and the unemployed are suffering, and if people still in work go round splashing the cash that is seen as insulting.

Some respondents have even been giving what they are saving on travel and other work-related expenses to charity. “I’ve donated a lot more to charity than I can normally afford to do, and have been able to support a wider range of causes,” says Maria, a 54-year-old charity worker in Nottinghamshire. “I am saving around £70 a month on travel costs. Donating more to charity has been an important part of recognising the imbalances between those who have retained their jobs and those badly affected by lockdown rules.”

Others are making a virtue of necessity and enjoying having to shop locally and be less consumer-driven. “It feels like a cleaner lifestyle somehow” is how 43-year-old Claire Stevenson sums it up. “I’ve actually enjoyed the fact that non-essential shops have been closed, as this helped me get out of the habit of unplanned spending. I’m spending much less as a result. As well as only buying things when I really need something, I’m shopping more carefully.”

“I have definitely been spending a lot less, even online, and therefore my savings have increased significantly in the past eight months,” says Joanna, a 32-year-old working in HR in London. “If I add together my travel costs and socialising after work or during my lunch hour, I am saving around £500 a month. I will continue to spend less when life goes back to normal, whenever that may be.”

Pamela, a 32-year-old software developer who lives with her partner in south London, sent in a before-and-after breakdown of their finances. “We have been spending way less than we used to,” she says. “We don’t spend much money on restaurants, cafes and bars. We almost never order food at home; we prefer to cook ourselves. We even learned how to bake delicious bread. Before the pandemic we used to save 14% of our salary. Now we are saving 33% of our salary.”

Joanna and Pamela’s experiences are not unusual. Some analysts have put the fall in average annual household expenditure at a staggering £6,600, which amounts to a £180bn hit to the economy. Debt has been repaid at record levels during lockdown. And research by Santander suggests that almost half of adults have set up a “rainy-day fund” and 60% of 18 to 34-year-olds believe their spending habits have been changed forever by the pandemic.

Research carried out in June by Opinium for investment company Hargreaves Lansdown suggested that for many people the new frugality was here to stay: 32% of those surveyed said they would go out less in future; 31% said they would cut back on impulse spending; 30% said they would buy fewer clothes; 21% said they would buy fewer “little treats”; 15% said they would spend less on food during the day. Further research in September on Christmas spending also suggested significant downscaling: 62% have changed their Christmas shopping plans because of the pandemic; 17% will spend less on the people they buy presents for; 15% will take people off their Christmas list. My mother will not be the only person shortchanged this year.

“This has been an opportunity for a lot of people to save money,” says Sarah Coles, personal finance analyst at Hargreaves Lansdown. “There is a group of people who saw the accidental savings build up during lockdown, became quite enthused about them, and realised they could change some of the things they’d fallen into that they get nothing out of. At Christmas, lots of people feel they have to go to lots of social events that they really can’t bear. This Christmas, there won’t be any of that, so there’ll be a big chunk of cash saved by not going out to hideous occasions.”

If all these changes do stick, our consumer-driven economy will be upended. “There’s definitely a change in behaviour,” says Coles, “but it’s not necessarily that people aren’t spending any money at all. Because they are spending less on going out to eat and drink, when they’ve got a lump sum in their account they’re spending it on home improvements. So rather than people stopping spending money, I think they’ll change the ways they spend that money. That does cause a problem for the economy, because there’ll be a gap. It’s not like businesses can go: ‘Let’s stop being a restaurant and start selling sofas.’ It’s not necessarily going to be the end of the world for the economy, but there is pain when we change our consumption patterns.”

Others are more sceptical that the changes will prove enduring. “The drop in spending in the second quarter of the year was significant, but I wouldn’t say that is a permanent change,” says Josie Dent, managing economist at the Centre for Economics and Business Research. “People couldn’t spend because they were severely restricted. There was also a large economic shock, and many households were far less confident economically. They were worried about losing their jobs, and no one knew when the crisis would end.”

Dent says lockdown has been a unique situation, with the economy in freefall but jobs and wages being propped up by the government, making unusually high levels of saving possible. But all that will end in 2021: people secure in their jobs will start spending again; those who lose their jobs and are no longer getting furlough will no longer be able to save. Unemployment will rise; incomes will fall; inequalities will increase. That spirit of fellowship I thought I detected in the replies to the callout will be sorely tested. We will no longer all be suffering – and economising – together. Where Dent does believe there will be a lasting effect is in working from home. That is now established and impossible to roll back completely, making substantial savings possible for employees who used to be entirely office-based.

Karl Handscomb, senior economist at the Resolution Foundation, says it’s important to differentiate between people who have been saving because nothing was open and those who have had to save because they were confronted with an “income shock”. He says there is evidence that in the summer, when the UK did briefly open up, the former started to spend again while the latter carried on economising.

With both groups spending less and saving more over the past nine months, the paying down of personal debt has been running at unprecedented levels. “Since March we’ve paid back about 7% of outstanding debt – not just credit cards but mortgages too,” says Handscomb. “That’s a phenomenal change.” The reason is not just that we haven’t been able to shop or go to Spain; people are worried about their financial security. Handscomb says that this year the percentage of adults anxious about the future has risen from less than 10% to 43%. That fear factor is likely to limit household spending well into the future.

We may not all be miserly now, but we are certainly cautious, and that will have serious implications for the economy. “If we all save at the same time, that hits the economy and it will take a while to adjust,” says Handscomb. But he doubts whether the new frugality will last for ever. “Eventually people will need to spend the money they’ve accumulated. You can’t save for ever. Or you can, but you just end up passing it on to future generations. I’m sure people are already looking at their savings and saying: ‘What a terrible rate of interest I’m getting on that. What’s the point?’”

Even Scrooge saw the light eventually and bought the largest turkey he could find. To give to a family that needed it of course. Extravagance and morality reconciled.

Some names of respondents have been changed.