Iona Bain: Covid has seen a rise in young investors

Millions have seen their incomes nosedive in 2020, and while more people are saving, interest rates are low. But Iona Bain sees the rise of young people investing as something to cheer.

Young people want their money to have purpose and power in the economy.

When I introduced the first Talking Money just over a year ago, I reflected on a potential new age of financial awareness in Scotland, and how technological change was reshaping our relationship with money. But who could have predicted Covid-19, which has made us more financially sensitive and more reliant on “fintech” than ever?

This article formed part of The Scotsman’s Talking Money magazine. You can view the 2020 emag here >>

As millions saw their incomes nosedive in 2020, the crisis prompted a huge shift in how we look after our money. Slashed lifestyle and social costs, combined with fears of redundancy, mean most of us are spending less and saving more. From a record low of 4.9 per cent in 2017, the UK

household savings ratio rocketed to almost 30 per cent in the first quarter of the year, despite abysmally low interest rates.

Saving is no longer seen as an unaffordable luxury, but a vital means of self-protection. Encouragingly, a summer survey by Nationwide suggested that 18-34s may well be driving this trend, despite – or, perhaps, because of – the fact they have economically suffered the most.

The shift we were seeing from physical to digital shopping accelerated rapidly, with a

42 per cent jump in online sales in the three months to August. Worryingly, this is also fuelling the rise of “buy now, pay later” schemes. Mainstream brands now routinely use plans that tempt customers into instant debt with easy sign-up processes, minimal credit checks and uber-cool marketing campaigns.

On the whole, debt is down since the start of the pandemic, with many households benefiting from mortgage and loan repayment holidays for the first six months of the crisis. But the official reprieve ended on 31 October, and many thousands of Scots are now struggling.

The biggest trend of all? The fast track to a cashless society. A third of UK adults now avoid coins and notes, believing they spread the virus, while many pubs and shops refuse to accept them. Contactless card payments are on the up, helped by the cap rising to £45.

Almost half of debit card transactions were via contactless in August – a boon for retailers, who know that a ‘tap-‘n’-go’ culture makes us spend more.

But we know a cashless world doesn’t suit everyone. The move to a mostly virtual financial world has left many behind, with 800,000 people estimated to face digital inequality, according to a report in June from venture philanthropists Inspiring Scotland. Support, education and better access to digital banking have to move up the agenda.

Few believed at the dawn of 2020 that it would be the year many people would claim benefits for the first time. The furlough scheme allowed businesses to stay afloat and avoid disaster when the coronavirus struck. The scheme was extended for a further month after the new lockdown was announced in England, and, on the day that lockdown commenced, it was announced that furloughing would continue until March 2021.

It’s been a particularly cruel year for the self-employed, with many now receiving a fraction of their previous income. Small company directors and those with newer businesses have fallen through the cracks altogether, with no government support.

A survey by Atom Bank found that 73 per cent of people used lockdown as an opportunity to put money aside, on average saving £1,974. But half used instant access savings accounts, where rates are now pitifully low and – with negative interest rates now possible – could get even worse.

It’s also no wonder that 2020 has been the year of the first-time investor. One major platform reported a 275 per cent increase in ISAs opened by 25-to-34-year-olds in the spring. Investing apps aimed at millennials have blossomed, suggesting we’ve had enough of being left behind. Young people want their money to have purpose and power in the economy, especially as we try to “build back better”. It’s this movement that inspired my forthcoming book: Own It! How Our Generation Can Invest Our Way To A Better Future.

This is a horribly uncertain time. But if there is one silver lining, it’s the chance for our nation to consolidate its canny reputation. Who knows? We may look back at this moment as the one that forced Scots to take charge of their finances, once and for all.

Iona Bain is an author, broadcaster and founder of the Young Money blog. Own It! – will be published in March next year.

This article is taken from the November 2020 special report Talking Money which first appeared in The Scotsman newspaper. To receive your free delivered copy please email [email protected]. UK addresses only. Subject to availability.