26 October 2016
- Average savings in UK now £16,240, poll shows
- Savvy savers thinking outside of the box by finding alternative places to invest their cash
- But two thirds don’t know their savings rate and one in five has never shopped around
Brits are saving more money than ever before - despite the record low base rate - as a new poll1 from Nationwide Building Society reveals the average amount saved is £16,460.
The Nationwide Savings report, which was conducted to determine the effects of a sustained period of low interest rates on savings attitudes, highlights around half of people (49%) have more money saved away now than they did in 2009 - the year base rate dropped from 2% to 0.5%2.
This figure, according to the research, is just £5,000 short of the amount Brits feel they need in reserve to feel secure (£21,313).
Despite the low interest rate environment, the vast majority (90%) still put money away whenever they can, with more than two in five (44%) managing to put money aside regularly. Encouragingly, more than half (51%) of savers say low rates have had no effect on their intention to save.
But even with strong savings behind them, more than two in five people (42%) say they plan to start saving even more. According to the research, the main reason for putting money away for nearly three quarters (71%) of savers is not about returns from interest, but to ensure they have a nest egg available should it ever be needed in an emergency.
And for a third of savers, they have built a comfortable financial cushion should the worst happen. According to the Money Advice Service, a good rule of thumb is to have three months’ essential outgoings available in a savings account. However, Nationwide’s poll shows 34 per cent have four or more months’ worth of salary squirreled away.
Despite the number of people who are still saving whenever they can, there appears to be a lack of understanding about how those savings are working for them. More than two thirds (68%) of Brits admit they have no idea what interest rate they are getting on their savings, while more than a third would never consider shopping around for a new savings account. The research also shows one in five (20%) of people have never changed their savings account.
Nationwide is committed to keeping savers informed of changes that may affect them. That is why the Society launched its SavingsWatch service in 2012 where registered savers receive a text or email advising them when the Society changes its rates, up or down, and an email letting them know when Nationwide launches a new savings account. To date, 1.26 million savers are benefiting from this service
Consumer and personal finance expert Sue Hayward comments:“It’s great to know we’re sticking to our savings habits, despite the low interest rate culture. However, while it’s good news we’re putting money aside, what concerns me is that we’re not very savvy about knowing how much interest we’re earning. Yes, it can be tougher than ever to find inflation beating rates, but there are still ways to earn around five per cent if you shop around, or consider a mix of both current accounts and regular savings accounts. In cash terms, you can boost your savings pot by over £100 a year this way, based on a savings balance of £2,500.
On the flip slide, it’s worrying to hear that 12% are not in a position to save any money at all. While in some cases this could be down to poor budgeting and spending habits, if your finances really are stretched to breaking point, then clearly your priority has to be keeping the roof over your head, rather than saving.
There’s also a significant gender savings gap with the average woman (£12,911) saving far less than the average man (£20,327), and that is reflected in the fact that, according to the poll, they are more likely to suffer anxiety (44% of women versus 30% of men) as a result of their lack of savings. The research shows around one in six (16%) men and women admit to feeling depressed by their financial situation.
Savvy savers thinking outside the box
With interest rates at historic lows, more savers are thinking laterally when it comes to choosing where to save or invest their money. More than two in five (41%) are moving away from the traditional savings account or investment towards more unusual and fun investments, with one in five (20%) admitting they are investing in their hobby. These include:
- Gold (7%)
- Art and antiques (6%)
- Jewellery (6%)
- Wine (2%)
- Comics (2%)
Spend, spend, spend
While some people are willing to save whenever they can, there are others who are happy to spend, spend, spend. In fact, more than one in ten (11%) will spend spare cash they have left at the end of the month. While some are splashing out on what could be seen as a fair treat – clothes (59%), nights out (48%) or the cinema/theatre (30%) – others are spending big with unexpected bonuses going on big ticket items, such as cars (5%), holiday (27%) and home improvements (17%).
Andrew Baddeley-Chappell, Nationwide’s Head of Savings Policy, comments: “Our latest report looks at whether the UK has lost interest in savings. As you will see, the answer is clearly a resounding no.
“While many of us save for a specific activity, event or purchase, for most of us saving is about security and having the ability to deal with any unexpected and unwelcome bills and costs. Although it is clearly hardest for those who have little or no income, research consistently shows that saving is possible and beneficial for those who can get into the habit, and that a small amount saved regularly can soon build up into a decent sized nest egg over time.
“Whatever your approach, be active with your finances and get into the habit of keeping yourself financially fit – not just for today but for the future.”
In August 2016, Nationwide set out a five-point plan3 outlining how it intends to help more people reach their savings goals or move into their first home. One part of that plan is to support savers by protecting rates on the Society’s Help to Buy ISA and Save to Buy savings products, so saving for a deposit doesn’t take longer than necessary. Nationwide will also maintain present interest rates on its Flexclusive Regular Saver account.