So we start stockpiling. We saw this in the early days of Covid with supermarket shelves stripped of pasta and toilet roll. And now we’re seeing it in a broader economic sense. People are putting a little bit more money away, just in case.
Be careful about being cautious
There’s definitely nothing wrong with having a little money set aside – in fact it’s sensible to have a cushion for the unexpected. But when the unexpected starts happening, if you’ve planned properly, you shouldn’t need to increase the cushion further.
It’s not just staying invested which is important, it’s also key to keep adding to those investments. We worry when clients abandon their investment plans, but we worry just as much when we see clients suggest abandoning their savings plan in order to preserve cash.
Clients who’ve been persuaded not to sell their existing portfolio often jump to the next ‘lifeboat’ – stopping regular savings “just until the crisis is over”. Piles of cash are seductive; it’s easy to stop putting money into a stocks and shares Isa, but much harder to start again. So much of the time that pile of cash sits there doing nothing, when it should have been helping to secure a future.
Financial fitness gurus
As ever with human behaviour, there’s no quick fix to solve it. We like to think of ‘financial fitness’ in the same way as physical fitness.
To get physically fit, it helps to have a personal trainer to achieve the best results. High-level athletes all have fitness coaches, and it’s not just to tell them what to do, it’s to help make sure they do it.
Helping someone with their financial fitness is the same. Regular reviews, advice about saving and spending and encouragement and support are all part of this. It’s not about taking the lizard out of the equation – it’s about knowing how to offer support when the lizard is running riot.
Helping someone to cage their lizard is an ongoing process, rather than a one off event. Our latest research piece, “Why cashing out could mean missing out” aims to help advisers with this challenge. Download your copy here.