How the Covid-19 crisis highlighted New Zealanders’ financial uncertainty
For many New Zealanders, the Covid-19 crisis has brought the uncertainty of their financial situation into the spotlight. The Commission for Financial Capability (CCFC) survey conducted during the last two weeks of lockdown, showed how many New Zealanders’ finances are close to tipping point.
According to the CCFC’s survey: 34 per cent of New Zealanders were already experiencing financial difficulty, and a further 40 per cent were at risk of falling into hardship. By contrast, 28 per cent of respondents in the UK, and only 8 per cent in Norway, were experiencing financial difficulty due to Covid-19.
Prior to the pandemic, New Zealand already had some of the lowest rates of household savings in the OECD, and this crisis has shown how dangerous that lack of savings can be.
Money in the bank
Only 26 per cent of households surveyed appeared to have enough money in savings to meet financial shocks and periods of instability without experiencing financial difficulty. Setting aside money for a rainy day is a goal that many of us have, but often isn’t financially viable or gets pushed to the bottom of the priority list.
The Covid-19 fallout has highlighted the importance of having a financial cushion if your income is disrupted. If you are thinking of starting a savings account and haven’t had one before, the key is to set aside a manageable amount and be consistent. For example, swap out a couple of cafe coffees a week to put $10 in the savings account. It doesn’t sound like much, but it accrues over time and it’s there when you need it.
There are plenty of options for savings accounts, many of which limit your ability to dip into your savings when the urge strikes. Many banks offer accounts that require you to give notice before withdrawing funds, or risk incurring a fee.
Borrowing to get by
Of the households surveyed, 40 per cent were at risk of financial difficulty if their income dropped and of those, half had borrowed money to buy food or other essential items during the pandemic.
Borrowing money to pay for regular household expenses like rent, food and utilities is a very precarious financial situation to be in.
If you’ve found yourself in this position, give Debtfix a call so we can discuss your debts and find a solution for you.
If you have enough money to pay your bills but you’re struggling with managing your money, a financial mentor will help. You can find a free budgeting service in your area at MoneyTalks.
Asking for assistance
34 per cent of households surveyed were already experiencing financial difficulties and of them:
24% had already applied to Work and Income for assistance since the start of the pandemic
23% planned to apply for a KiwiSaver hardship withdrawal
14% planned to take out a loan or multiple loans to cover their expenses
9% sought advice from budgeting services
Debtfix may also be able to help if your concerns specifically relate to debt.
If you’re concerned about how to manage your money or want to find out more about what you may be eligible for, consider talking to a financial mentor.
Contacting creditors
Of the 30 per cent of those surveyed who contacted their creditors to make new arrangements, 28 per cent were turned down by at least one creditor.
That indicates a lack of readiness on the industry’s part to respond to a significant crisis and it is also important that you tell creditors ahead of time if you will have difficulty meeting repayment obligations. The more notice you give them, the better the likelihood of a positive result.
If you’d like some advice or assistance contacting your creditors, Debtfix can help.
Has the Covid-19 pandemic changed your approach to financial planning?
We’re still in the early days of understanding the impact of Covid-19 for New Zealanders and the wider world we live in, but it’s a good time to think about changes we can make to better prepare us for the future.
Were there areas you made savings during lockdown that you could keep up now? Did the pandemic make you rethink your approach to savings?
If you’re struggling with meeting your repayment obligations in a post-Covid world, give Debtfix a call. We’re here to help.