Many of us have found that we have built up a pandemic bonus. Lockdown has left many people with a cash surplus thanks to the daily commute, rail fares, petrol and parking all being cancelled, while shuttered shops, pubs and restaurants shut have meant fewer opportunities to spend.
At Continuum, we are looking at ways to make the most of your pandemic bonus.
What exactly is a pandemic bonus?
Many people have been left with more cash than they are used to by the lockdown restrictions. Unsecured debt fell in each month between March and November last year and Deposits in bank accounts increased by £44.6 billion in Q2 2020.
Fears about the future also caused people to hang onto their money. The removal of opportunities to splurge cash, was accompanied by a real threat of economic recession and the impact on people’s jobs prospects. This was enough to turn some households into savers overnight.
Now, the government wants us to spend, spend, spend to boost businesses and kickstart economic growth, but we might want to think carefully before we fritter away the cash we never thought we would have.
If you have a cash surplus but a balance on your credit card, paying off debts should be a priority. The interest rates charged on credit cards is inevitably higher than you are likely to earn on most savings or investments. Paying off existing debt is therefore a shrewd way to use your pandemic bonus.
But cash savings might not be a good idea
Simply keeping your money as cash in a savings account may look safe, especially in the light of the roller coaster ride experienced by stock market investors in the past 18 months. But with bank rate at a record low savings accounts mean poor returns.
What’s more many observers believe that inflation is inevitable as the recovery really gets underway. Stashing money in a savings account in a time of inflation will mean watching its real value be eroded.
Investment may be the solution
For many people the best way to use a cash bonus might be to invest it.
With an investment, your money is used to buy something such as shares in a business. Cash inflation is no longer a problem. If your wealth is invested, its value can grow in real terms, while the value of cash – and savings – falls.
What’s more, by putting your investment in an ISA, the taxman is unable to take a slice of the profits your investment makes – which makes investment potentially more rewarding.
But how can you get started? Many people look at the complications of stock market investment and are put off. There seems to be a great deal of jargon to decipher and expert knowledge to learn. In fact, with a little help from the Continuum team, investing can be as simple as saving. We work with clients to create long term investment strategies that reflect their resources, plans and timescales and their attitudes to risk.
As part of the service, we can take you through every step, whether it is finding a fund that lets you pay into whenever you have cash and provides an investment manager to take care of everything for you.
Of course, your own investment decisions need to be based on your own circumstances and plans. Getting the support of an investment expert may be vital to enjoy the real rewards of the recovery, and the simplest way to secure it is to call us at Continuum.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
Request a callback
Our services at Continuum are delivered by some of the most qualified advisers in the UK, to create the ultimate client experience.