This past year has been ‘turbulent’ to say the least. Due to the COVID-19 pandemic, we have experienced the largest economic fallout in over 300 years, with GDP down 11.3% and public sector borrowing estimated to have reached £26.7 billion in July of this year, the fourth-highest borrowing in any month on record.
Whilst the Government and industry bodies have done their very best to support consumers and businesses during 2020 with a wide-ranging number of support packages, there is only so much this support can do to quell the financial uncertainty experienced by most. Support offered has included bounce-back loans for businesses in need, the Government’s furlough scheme, an increase in benefit payments, the self-employment income support scheme, stamp duty holidays and payment holidays on mortgages, credit cards, loans, overdrafts and car finance, although there are even more.
Even with these schemes in place, our current financial system is looking increasingly ill-equipped to overcome the stresses brought about through this pandemic. Now is the time to re-evaluate financial situations and what you’ve done in the past, to educate yourself and to make shrewd decisions to build up financial resilience as you head into 2021.
Our ‘2020 Future of Money’ survey had more than 15,000 respondents from across Italy, France, the UK, Nigeria, South Africa, Malaysia and Indonesia, and helps to understand consumers attitudes to their finances in 2020 whilst pointing to ways in which they can build up their resilience moving forward.
Why people are feeling financial uncertainty in 2020
British unemployment is expected to rise to 7.5%, putting 2.6 million people out of work. As of November 15th, approximately 9.6 million jobs, from 1.2 million different employers were furloughed in the UK as part of the government’s job retention scheme.
In this environment it is easy to understand why almost half (46%) of people do not feel secure about their current financial situation, an increase from when asked the same question last year. This year, fewer people are relying on their salary as their primary source of income (a decrease of 8%), with government support as a source of income increasing by a staggering 30%. This trend is fundamentally unsustainable, and for economic and social recovery in 2021, consumer’s will need to explore different routes to build up their financial resilience.
Interest rates are currently at a record low, with the Bank of England base rate resting at just 0.1%, whilst the average instant access savings account delivers just 0.07% in interest. In 2020, almost a third (35%) of people said they didn’t earn interest on their money at all, with a further 46% currently earning interest on their money through a current or savings bank account. We have also seen a 5% decrease year on year in people who invest, with 48% stating they didn’t invest in 2020, compared with 43% in 2019. With inflation well above the interest levels offered on savings and current accounts, consumers are seeing their money devalued and their purchasing power decrease as time progresses.
How crypto can help build financial resilience in 2021
Overall, it’s clear to see there’s a low appetite for saving and investing, and while this may have been manageable in the past, the financial uncertainty in the years to come thanks to the mixed bag of monetary policies being thrown at the current economic crisis presents a bleak future.
In the midst of all the financial chaos, bitcoin has emerged as an attractive alternative to fiat (or government-issued) money – both for its deflationary properties and the relative stability it’s seen this year.
Renowned macroeconomic investor and hedge fund manager Paul Tudor Jones said it best:
“We are witnessing the Great Monetary Inflation — an unprecedented expansion of every form of money, unlike anything the developed world has ever seen […]. The best profit-maximizing strategy is to own the fastest horse […]. If I am forced to forecast, my bet is it will be Bitcoin […]. Bitcoin reminds me of gold when I first got into the business in 1976.”
Although Bitcoin has seen its ups and downs through 2020, as of 4th of December, it achieved an all-time high of almost $20,000. From January of 2020, it has experienced growth of 466%. Now, it is not only possible to invest in Bitcoin but to also earn defined interest through Bitcoin Savings Wallet, a new feature from Luno which earns targeted interest of 4%, well above the average 0.07% offered by standard instant access savings accounts.
In the future, Bitcoin could be the preferred saving instrument by many. Its absolute scarcity and decentralised nature might make it the only feasible option to opt-out of the great monetary experiment.