Research reveals the Aussies best equipped to live off savings in lockdown: How do you compare?

The average amount Australians are saving each month has gone up this past year, and spenders are spending less, new survey data shows. But despite growing cash reserves overall, nearly a quarter of Australians wouldn’t be able to maintain their current lifestyle for even one month if they lost their jobs and had to live off their savings.

ME released its bi-annual Household Financial Comfort Report on Tuesday. The survey results* showed financial comfort among households had increased 3% in the six months to June, ‘savers’ were saving more, ‘over-spenders’ were spending less and households felt better-prepared to cope with a financial emergency.

People were saving $960 of their income each month on average, according to the findings, which is $106 more than the same time last year.

At the same time, spenders said they were overspending less, at $483 each month compared to $617 recorded in June 2020. That’s the lowest overspending amount recorded since December 2018.

ME Consulting Economist Jeff Oughton told Canstar the lift in precautionary savings could be permanent, as households try to prepare for when the unexpected happens.

“People have been through a once in a hundred-year event, people will remember, and it will have changed their financial behaviour,” Mr Oughton said.

“They’ve changed their spending habits, boosted their cash savings, and the labour markets have improved significantly over the last year but we’re now going back into another – hopefully short – recession and some are going to be doing it tougher than others.”

Despite many people building their financial resilience, the results showed over 1 in 5 Australian households surveyed (21%) reported having less than $1,000 cash in savings in June, including 9% who said they had less than $100.

Which Aussies are most able to cope with a drop in income?

An average of 24% of households said they would only be able to maintain their current lifestyle for a month or less if they lost their income, and 11% wouldn’t be able to do so for two weeks, or the equivalent of a short COVID-19 lockdown.

This was higher for South Australians and Queenslanders, where around 30% said they would be able to maintain their current lifestyle for only a month or less if they lost their income. In Canberra, only 13% said the same.

Mr Oughton told Canstar people’s ability to live off savings without changing lifestyle became more difficult in the areas where they were on lower incomes with low levels of cash savings.

“You can see in the ACT where incomes are higher that the concerns are much less. They generally have greater job security in the public service,” Mr Oughton said.

The inability to live off savings for a month or less was also higher among single parents (27%), with 51% of single parents saying they would be dependent on government assistance and 31% of couples with young children saying they’d struggle under these conditions.

The results also showed 28% of people who have a mortgage would have issues maintaining their lifestyle for a month or less without work, compared to 37% of renters and only 10% of homeowners.

Casual workers and the self-employed also recorded much higher on this metric than the average, at 30% and 29% respectively, and 29% of females, who work fewer hours and have lower incomes on average, would have to make changes to their lifestyle, compared to 20% of males.

Low-cash households at “significant risk” from extended lockdowns

A 22-year-old Melbourne woman, Evie Fisher, said she could make it six months by living very frugally and refraining from discretionary spending if she lost her income. But to sustain her desired lifestyle, she would only be able to live off her savings for two months.

“I have been very restricted in my spending due to the pandemic, especially during the most recent lockdowns due to no income support and a complete shutdown of the organisation I work for,” Ms Fisher told Canstar.

“I am currently living off my savings, so have had to live very frugally and only spend money on essentials in order to ensure I am not spending the money I have worked hard for and saved for future planning (holidays, buying a home).

“I have had to stop spending money on takeaway food and supporting small business, and have had to rely heavily on my family to support me to purchase food and essential items.”

Mr Oughton said extended strict lockdowns in New South Wales, Queensland and Victoria meant households with low cash savings were at “significant risk”.

“We’re in the third wave of COVID-19 in Australia, and lockdowns have certainly gone more than a couple of weeks in many cases, so those people on the edge of that private savings cliff are very dependent on government support,” he said.

*The ME Household Financial Comfort Report is based on a June 2021 survey of 1,500 Australian households.