You might be one of the lucky ones saving more than ever, or you might be on the breadline for the first time. Whatever the experience, COVID-19 has impacted every single one of us in some way. At Nosso, our vision is to help parents who are regularly saving, make better financial decisions and have a more secure future for themselves and their children. We caught up with three of our early customers to talk about the effect COVID-19 has had on their finances.
Tough time for the self-employed
“I was eligible for the Self Employment Income Support Scheme (SEISS), but maternity leave screwed me over. They take an average of the last three years’ salary, but for the last full tax year, I earned something like £2,000. If I had worked a full year, I would’ve been entitled to a lot more.” Lizzie’s a freelancer working in theatre, and her partner’s an academic - they have a toddler. Before having a child, she was the main breadwinner. She finished maternity leave six months before the pandemic hit, and was nearly back on her feet by March. With the theatre industry being one of the hardest hit, the work dried up within the space of a week and Lizzie found herself short-changed. Pregnant then Screwed estimate that 69,200 women are affected. They’ve launched a legal challenge against the government, with the support of Doughty Street Chambers.
Like most people, Lizzie and her family managed to cut down spending in some areas. “Our nursery was good, and didn’t charge us while they were closed, which makes a big difference. We can’t go anywhere or do anything so we’re saving on coffee and trains.” Whilst this helped, being in an industry which will be closed for a long time has meant Lizzie has had to diversify. “If you want to make the economic argument, the arts bring in £5 of revenue for every £1 of investment, but theatres aren’t going to be opening up anytime soon. Instead I’ve been doing communications work for an economic foundation. I’m not particularly passionate about it, but it’s quite well paid.” For those families that went from comfortable to scraping by in a short space of time, the pandemic has brought unprecedented challenges.
Financial planning isn’t just about investments, pensions and savings. It’s also about having the right insurance in place - to protect you when things don’t quite go to plan. This is especially true when you have dependents. It’s tricky to find the right insurance if you’re self employed but we’re big fans of Portabl and Collective Benefits. Self-insurance is also something to consider if you’re self-employed. Just put a small % of your income every month in to a pot that you only touch if you can’t find work.
Preparation is key
James and his partner found themselves in dire straits in March - just half of one income, and a new baby to worry about too. James’ partner - who was on maternity leave - worked for a high street brand that went into administration, and James had joined a travel start-up just before lockdown. On top of this, after a short period of furlough, James was let go with only a week’s notice, as he was still on probation. “We weren’t saving much for the baby - I have £100 a month going into her Junior ISA as a standing order, and we can’t lower that because of the provider’s restrictions. If I hadn’t found a new job, we wouldn’t have been able to do more than this - and we would have had to change to a more flexible JISA. We might still do this, and move it back when things are a bit more stable.”
In their day-to-day spending, the family has seen less change than others. “We’re not really going out people - we might go to the cinema or the pub occasionally but I cycle to work too. We haven’t seen a massive reduction in our everyday spending. Even when we go to the cinema, it’d be on a cheaper day. We do holidays, so we’re saving a bit there. I do usually put more than the average share of my income into savings, but it’s been quite a significant hit on both of us.” Whilst James did have some savings, they weren’t easy to access. “I had a few hundred pounds in a fund, but most of my savings were in a Stocks and Shares ISA so I couldn’t access it without penalties. We didn’t save in mind of us both not having a job for three months.” Luckily, James’ new employer has been doing well throughout the last few months, so things look more positive for him now.
There’s two main financial planning tips that we have for James and his family. Firstly - an emergency fund is crucial. You never know when things are going to go wrong and an emergency fund just gives you that extra cushion to fall on. Depending on what kind of sector you work in, this should cover between 3-6 months of expenditure. And make sure it’s an easy access account like Marcus. The next lesson is to make sure you’re in the right products. If you’ve gone for a JISA, there’s no reason your provider should force you to put £100 per month. At Nosso our JISAs have no minimum regular contribution amounts and you can start investing from as little as £10. This means if things get tight you can just stop contributing and pick up again at a later date.