AMP’s Financial Wellness research shows more Australian workers are relying on personal credit to cover expenses as result of COVID-19.
11 per cent of Australian workers whose working hours have been impacted by the pandemic report an increased reliance on credit cards to pay expenses, while seven per cent have taken out a personal loan.
The figures reflect increasing levels of financial stress caused by COVID-19, with those Australians who perceive the pandemic to have had a negative impact on their finances almost three times more likely to feel anxious about their finances.
In addition, two in five Australian workers who accessed their super as part of the early access scheme, have used the funds to pay off debt. This coincides with almost a quarter (22 per cent) of workers abandoning their pre-COVID goals to pay off personal loans and credit cards.
AMP Financial Adviser, Andrew Heaven said:
“It’s clear from the research that those whose working arrangements have been directly impacted by COVID are relying more on credit cards and personal loans to meet day-to-day needs.
“As we enter the Christmas period – a time when we typically spend more – there’s added risk already financially stressed Aussies will face mounting credit card bills in January.
“It’s important they think carefully about their spending and use of credit over the Christmas break to avoid amplifying anxiety in the new year.
“Sticking to a Christmas budget, avoiding spur of moment purchases and being aware of the type of credit used can add up to big savings and significantly reduced interest payments down the track.”
Four tips to manage Christmas spending:
- Look at smarter gift-giving – Find ways to keep a lid on spending while still enjoying gift-giving that’s kinder to your hip pocket such as avoiding spur-of-the-moment spending, chipping into group presents and buying gifts in bulk.
- Plan ahead where possible – A good way to save money over Christmas is to plan your Christmas budget in advance. For example, keeping an eye out for annual sales, and looking to Boxing Day sales for the following year’s presents.
- Think debit rather than credit – If you can, consider using a debit account with a competitive interest rate. And if you can’t avoid credit, try to limit the damage. Think carefully about the type of credit you choose to use and check the important conditions, like interest-free periods, and what you’ll be charged if you can’t pay on time.
- Consider consolidating your debt – Small debts may not seem significant, but having multiple smaller debts could mean you pay higher interest rates and multiple sets of fees, all of which can hit your wallet. Consolidating your debts into one loan can give you a clearer picture of what you owe and hopefully save you money on interest too.
About the research
AMP’s Financial Wellness research is conducted by The Behavioural Architects, a global insight, research and strategy consultancy, specialising in the application of behavioural science. Insights were collected from more than 2,100 Australian employees and weighted to reflect Australia’s broader workforce, based on data from the ABS.