The Resolution Foundation think tank has got off to a busy start to the year, with a couple of reports in January that highlight the impact of the cost of living crisis and the longer term challenges of helping people to save.
Cost of living and savings
In its Living Standards Outlook it highlights the important role that cash savings provide as a buffer when costs rise.
58% of people with £1,000 or more in savings would be able to deal with an unexpected expense using existing savings, compared to just 4% of those with less than £1,000. Those with less than £1,000 would be more likely to fall back on family and friends or to cut back on essentials.
As low income households tend to have fewer savings they tend to be more exposed, and the results show the position of people in some ethnic groups are concerning: 52% of Black people said they had less than £1,000 in savings, compared to 28% of White people.
The Outlook also finds that the cost of living crisis is harming people’s mental and physical health, with those with lower financial resilience more likely to be experiencing emotional distress.
It is findings like these that motivated the first UK Savings Week last year.
The Week encourages people to engage with saving, and offers tips on how people might start to save small amounts regularly in a way that works for them.
Incentivising saving
In another report, the Foundation’s analysis shows that the UK has a long history of low levels of household saving relative to other countries, despite various Government schemes to encourage saving. The report suggests various reforms to these schemes.
Low savings are common across all income groups, even those with the highest incomes, but very low or zero savings are most common for low income families.
Many families, especially those on low incomes, also have a high proportion of their savings held in current accounts, earning low or no returns. In the lowest wealth grouping for which there is data, 67% of savings are held in current accounts and just 22% in savings accounts.
Separately, Bank of England data shows that there is £268 billion in total held in accounts that don’t pay any interest.
This lies behind another key message from UK Savings Week.
We encourage people to actively manage their savings, taking stock of their saving situation and shopping around to see if they could get a better deal and achieve their savings goals more rapidly.
We hope the 2023 campaign will engage even more people and help the 11.5 million people who have less than £100 in savings to build better financial resilience, and help people to make the most of their savings.
