In 2021, New Zealanders need to maintain some of the good saving habits demonstrated during lockdown, according to Kiwibank economist Mary Jo Vergara.
Full figures on just how much people spent during the double blowout of Black Friday in late November and the Christmas-Boxing Day spend up are not yet available – but Vergara says there are some consistencies when it comes to increased personal debt levels at the end of the year.
"On average, New Zealanders spend about $9.1 billion during December, with about 56 per cent of that going on the credit card. Spending typically rises toward the end of the year, as the festive season begins. The highest spend is during the month of December."
That's about $5bn slotted onto our credit card balance alone and Vergara adds: "The proportion of outstanding balances that incur interest typically starts to grow in January after the holiday spend-up – and it takes a few months in the new year before that rate declines."
"We've seen strong demand post-lockdown," she says. "Business and households have quickly learnt to trade in a world with limited face-to-face contact, embracing the shift to digital. Consumer spending has fared much better than first feared.
"Spending levels remain elevated since leaving lockdown and the holiday season may give it another leg higher."
All of which makes Vergara hope that, with debt levels rising again after the end-of-year spend, New Zealanders will maintain what they did during lockdown – good saving habits brought on by the pandemic and subsequent lockdowns.
With lockdowns meaning spending was limited to essentials only, New Zealanders tucked money away, with Kiwibank's deposit growth up 15 per cent year on year.
"Lockdown also presented an opportunity to pay down debt, with total Kiwibank outstanding credit card balances dropping 18 per cent in April. That's continued post-lockdown, with balances down six per cent overall, compared to pre-Covid."
That said, there is still a tendency to spend freely over November-December-January, even with some of the supply problems at our ports which may have impacted Christmas spending.
Kiwibank's daily transactional data shows that December 23 is usually the busiest day of the month, with spending over 80 per cent higher than the average spend in days leading up to Christmas. Most of that spend goes on last-minute purchases, with spending higher at department stores (last-gasp present buying), petrol stations (fuelling up for the road trip) and on groceries.
Vergara says her view of 2021 is that the economy will bounce back, but the return to full recovery will be long and arduous: "The Kiwi economy is in a much better position than we initially forecast. Around 95 per cent of our economy has outperformed, but the five per cent reliant on foreign tourism is still out of action.
"The economic outlook for 2021 and beyond hinges a lot on our assumptions around the border restrictions – and it's unlikely our borders will fully re-open until 2022.
"We've felt the impact of the lockdown. We are yet to feel the full effect of our closed borders," says Vergara – who adds there are some simple things people can do to maintain steady financial health.
Here are some tips to get the year off to a good start:
• Small savings add up big-time: Even if you can only save a few dollars a month, do it – and do it as soon as you get paid, rather than at the end of the month. Those dollars add up and start forming good savings habits.
• Have a savings goal: "This year has taught us the importance of having an emergency fund for when the unexpected happens." Aim to save at least three months' expenses so another outbreak and lockdown won't be as damaging. If that doesn't happen, well, you've got a ready-made holiday fund available."
• Address your debt: do a self-audit, writing down all loans, interest payments and regular bills, so you can get on top of debt.
• Budget wisely: The house, car or trip of your dreams starts with a good budget. Keep track of what is coming in and going out. Be precise - guesstimating won't do you any favours.
• Consolidate your finances: Often you can marshal all your debts into one – meaning you won't be stung from interest on numerous accounts. It means you can pay down one account in larger lumps, rather than having to make small payments across several accounts.
• Educate your kids, too: Being smart with money starts young, so show your kids the cost of things and show them your budget – for example, if you are saving for a family holiday, show them how a good budget makes it possible.
For more financial tips this summer, go to kiwibank.co.nz/fish-n-tips
This is intended as general information only. It does not take into account your financial situation and goals and is not personal advice. For advice about your particular circumstances please see a financial adviser.