More Australian households are encouraged to save amid the pandemic, as financial comfort levels rose to an all-time peak, the latest study from ME Bank shows.
ME’s Household Financial Comfort Report showed that for the first six months of the year, Australian's financial comfort index increased by 3%, hitting 6.04 out of 10.
Saving intentions up
One of the highlights of the study was the substantial improvement in Australians’ comfort with cash savings, which also hit a record high during the period.
In fact, those who considered themselves "savers" saved more over the first six months of the year.
This has resulted in the share of saving households increasing to 58% and the average monthly saving hitting $960.
On the other hand, only 34% of households reported that they break even, while 8% overspent.
However, the average amount over spenders shelled out decreased to $483, the lowest since December 2018.
To give a little bit of context, the study showed that historically, only 50% of Australians were able to save, while 40% were spending all their income. The remaining 10% spent more than they earned.
Given the higher proportion of Australians who are saving, the comfort with the ability to cope with a financial emergency also improved during the first half of the year, beating the previous record.
Some Aussies still vulnerable
ME’s consulting economist Jeff Oughton said despite the improvement of financial comfort in many aspects, many Australians are still vulnerable to sudden shocks that could result in income loss.
For instance, around 21% of households reported having less than $1,000 in cash savings,
Furthermore, a quarter of the households said they would be able to maintain their current lifestyle for only a month if they lost their income.
"Despite more households saving and an overall greater comfort with cash savings, there’s still a significant proportion of Australians that remain highly vulnerable to a loss of income," Mr Oughton said.
"With pandemic lockdowns continuing to occur across Australia, households with low cash savings are at significant risk, especially in instances of extended strict lockdowns like we’re currently seeing in New South Wales, Queensland and Victoria.”
Improving labour conditions
Labour and employment conditions have improved during the first half of the year, but this might not hold true for all Australians.
While 41% of Australians believe it would be easy to find another job within two months, around the same share of casual workers feel they are underemployed and said they would prefer to work an additional 13 hours per week.
"Labour market conditions are a key reason that overall financial comfort has increased over the past six months, but paradoxically they’re also one of the leading drivers among households who said their financial situation has worsened," Mr Oughton said.
Biggest winners, losers
The groups that experienced the biggest improvement in financial comfort consist of young couples with no children, single households, and retirees.
In terms of location, NSW and Victoria reported the highest levels of financial comfort.
Millennials and Baby Boomers over are the most comfortable with their finances, as opposed to Gen Xers whose financial comfort eroded during the period.
Financial comfort also worsened among single parents who are dependent on government assistance, self-employed workers, and casual employees.
New financial habits
Another recent study by ME Bank showed around 40% of Australians have developed new financial habits amid the lockdown to achieve their financial goals.
These new habits include spending less on takeaway meals and coffee, creating a savings plan, tracking expenses, planning purchases, and spending less on groceries.
ME's money expert Matthew Read said the COVID-19 lockdowns have made Australians more "financially savvy".
"We all know the lockdowns aren’t easy, and we’re once again being tested, but it’s great to see so many Australians' working towards a healthy financial future," he said.