The research shows, across the nation, that 4 in 10 (a whopping 16.8 million) working-age people lack a savings buffer, with less than £100 in savings available to them at any time.
In London, the figure is 42.3% of the estimated 5.7 million* people of working age living in the area are unprepared for the unplanned expenses or unexpected bills that may have severe consequences on their financial stability. As unanticipated expenses are a regrettable fact of life, with nearly three-quarters (71%) experiencing these at least once a year, the disturbingly low levels of savings mean many are left open to the need to turn to credit or borrow from friends and family to cover these costs.
While it is true that saving might be difficult for low-income earners. Particularly for those barely able to pay the daily household bills, especially those with children or already in debt.
However, it is possible for a low-income earner to save money, as the research showed that 23% of working-age adults, in the UK, have a household income of less than £13,500 have more than £1,000 in savings and 40% save every month or most months.
It is already known that levels of income, debt, and stage in life tend to affect consumers’ view on saving. And this new research points out a few other factors that influence savings attitudes across the UK including a ‘live for today’ mindset. This can be seen in consumers who feel they can’t or won’t be able to prioritise saving because of the varied and sometimes hefty commitments and demands in their day-to-day living.
The key message highlighted by this research is the value of saving regularly, even if the amounts are modest or even small. As it is very important that people have day-to-day money management skills to deal with their finances and find the opportunities and incentive to put a little money aside to meet their financial goals. Saving regularly, even in small, manageable amounts can make a real difference to a person’s financial security.
Nick Hill, Money Expert at the Money Advice Service, speaking about the research said: “These figures show the millions put at risk by the saving gaps in the UK. Everyone’s situations and abilities are different, so it’s important to find an approach to saving that’s right for them and their household. For some on low incomes, saving is a real challenge as they may simply lack the income needed to save at all.
“But for many, developing a savings habit is very achievable. Regular saving is key to building up that buffer against those life surprises. If you earn enough to set even a little aside each month that’s great – a direct debit into a savings account might be an easy way to do this, even if you start small and increase the amount with time.
“Our research also showed that if people set a manageable savings target, they’re usually able to reach it. Setting a savings goal – in the case of our study of £100 a month – was shown to have a positive impact on people’s financial skills and their attitude towards savings.”
Martyn, who took part in a Money Advice Service challenge, which encouraged people to save around £100 a month, saved £420 over three months. He said: “When I started the challenge I realised that there were lots of ways that I could cut back further on my spending. I took a look at what we were spending on food shopping. With the help of the whole family, including our parents, we started to reduce our grocery bills by preparing a seven-day meal plan.”
More information on the importance of saving and tips on how to develop a savings habit is available on the Money Advice Service website.