I often talk about cutting down on unnecessary spending (the coffee on the way to the office; the sandwich from the sandwich shop when you could have made one at home) and I am all for building up savings.

But in lockdown Britain we may have gone too far, become too risk averse, and that could be to our detriment in the future. Let me explain why I think that.

Before lockdown the average household saved about £140 in cash deposits each month. By May that had rocketed more than five-fold. That’s £900 per family or £25 billion across the UK.

On average before lockdown it was £4bn in total. By March it was £14bn and by April it was £16bn.

One obvious reason for the increase is there was so much less to spend money on, thus more spare cash to save. You couldn’t go out for a meal, go for holiday or weekend away, or even buy that coffee or sandwich.

But there is another reason  - and this is one we can control. Our aversion to risk. It is inbuilt in us. It takes us back to our basic instincts and is driven by something often called our Lizard or Reptile brain.

It’s that bit of your brain that responds without you even thinking about it. The bit (the basal ganglia and brainstem for those of you who like a bit of anatomy) that means you can do things almost automatically, like riding a bike or driving a car or running away when you feel threatened.

Squirreling away money, because we are fearful, fearful for the present and fearful for the future, makes sense on a really basic level. We need to feel safe, we need to survive, that is a really basic response to any threat.

It happened at the start of the lockdown when people were panic buying loo roll and pasta and flour (and it seems tonic, as I could never get any of my favourite brand to go with my gin). Everyone was reacting in a really panicked, I-must-survive way.

And now we are hoarding money; but mostly we are not doing it in a very clever way, we are saving cash. Cash that makes us feel safer, but in the long term does not bring us the returns on investment we need.

I know I encourage people to save, to have some rainy day money; but once you have enough as a cushion you can look at smarter ways to invest, ways that will bring better returns in the long run.

So what we also need to do now is engage our thinking brain, the conscious bit of our brain, the bit that doesn’t just respond, but looks at the pros and cons and works out carefully what is the best route to take.

After all, our investments are a marathon not a sprint. We need to think about what we need in ten, 20 or 30 years, and not just what will tide us over as we enter 2021.

And while you are pondering on the longer term,  I am going to suggest something I thought I would never encourage, buy yourself that coffee or sandwich, treat yourself a bit. After all the local coffee shop and sandwich bar needs your money too right now. Just don’t forget to wear a face mask.

If you want to talk to us about savings and investments please give us a ring on 01246 435 996 or go to our contact us page.