In the latest UK Savings Week blog we hear from a couple of savings account providers about building good savings habits.
These cover how to get into saving in the midst of a cost of living crisis and the importance of regular saving.
Building a saving habit in a cost of living crisis
The increase in the cost of living has reached dizzying new heights in the last few months. With the UK inflation rate now a staggering 9.9% due to higher energy, food and drink prices, according to the Office for National Statistics, it does not seem to be slowing down any time soon.
Given this backdrop, it is hard to imagine it is currently a time when saving is an option. Although challenging, I believe it is now more important than ever that as an industry we encourage and help our members build a regular savings habit to help them navigate through not only these unprecedented times but also to feel more in control of their future.
The question is how do we help encourage our members to build and develop a regular savings habit amidst these difficult times?
Firstly, we need to understand that 48% of people say they will not be able to save anything in the next 12 months (ONS). This figure demonstrates the severity of the current climate and why it is imperative that we help those that can as much as possible. It is up to us to show that starting and building a savings habit can help create a safety net and help people feel more in control of their finances should anything go wrong.
Putting a small amount of money away each week or each payday can quickly build a savings fund for emergencies, unexpected bills, or even for special occasions and events such as Christmas. Implementing a savings habit can help reduce worry about the future and can help provide security, knowing that they have a savings fund available should they need it.
Over the years, we’ve found that many people prefer to put money away straight from their wages from as little as £5 a month upwards. What may seem small builds up over time and can come in handy, even just as a rainy-day fund. Many members who have been with us for the past 30 years started saving just a few pounds a month – as a result of this, our members have built up a total of £180m!
I believe that building a savings habit during difficult times such as those as we are currently experiencing is a challenge, but as many of our members have shown, it is a challenge that can be overcome.
The importance of regular savings
It’s obvious that saving is good for your finances, being able to access cash when you need it is one of the first steps to budgeting and fundamental in withstanding a financial shock. But regular savings is nothing new, go back 50 years and you’d not be surprised to find people buying savings stamps as part of their weekly shop, the local insurance man calling at the front door to collect that week’s payment or even seeing children saving regularly at school. Years later as technology has advanced the ability to automatically send a set amount each month from our bank accounts has taken over that behaviour.
Yet low financial resilience has become a national issue. We find ourselves with one of the lowest personal savings rates in Europe. As a country we must think of saving as a natural thing for everyone to do when they can afford it. So that, in times like these, people have a much-needed emergency buffer to fall back on with less reliance on costly short-term loans or increasing debt to manage unexpected bills.
Regular savings accounts are one way we can encourage our members to establish healthy savings habits. They are great help if you have a goal in mind, a special occasion, a wedding or even saving up for future investments like a car purchase or house deposit. Committing to saving a set amount each month will help focus on the goal and help you find and maintain that habit. Regular savings accounts often come with a higher interest rate too which you can take advantage of.
The most important step to take towards building financial resilience is for people to start a savings habit – however that works for them.