The latest National Savings & Investments (NS&I) Quarterly Savings Survey, which is now 10 years old, reveals how little the average Brit is saving:
- 10 years ago the average person in Britain saved £82 per month
- This has now risen to £98 per month, but is still less than 10% of the average income
- 74% of people now manage their money over the internet, up from 29%, 10 years ago
Commenting on the survey Julian Hynd, Director of Retail at NS&I, said: “The way customers use and access the internet is changing, and in turn, the way they manage their money is changing. Over the last ten years we saw a switch from customers banking at branches to going online. Over the next decade, we will see smartphone and tablets emerge as a key means for money management as customers look to take more control of their finances while on the move or at a time that is convenient to them.”
According to NS&I the average person now saves 7.76% of their annual income, up slightly from 6.42%, five years ago, when the country was gripped by the effects of the financial crisis and a deep recession.
However, despite the economic recovery , the current amount saved each month though is still below the peak of £102, recorded in the Winter of 2012.
Savings on the decline
The survey also reveals that that the number of people saving has fallen significantly:
- The number of people saving for a holiday or special occasion has fallen from 47% in 2007 to 40% in 2014
- Whilst the number of people saving for the longer term has dropped from 41% to 33%
- However, the sharpest drop is in the number of people saving for retirement, down from 38% in 2007 to just 22% now
The drop in the number of people saving for retirement is perhaps the most worrying finding, especially as many people will have to wait even longer to receive their State Pension. However, experts point out that as Automatic Enrolment reaches all employers over the next few years; the ratio of people saving for their retirement should increase.
Save or borrow?
As the economic recovery takes hold, on the back of increased consumer spend according to many commentators, the temptation to take credit to make a purchase, rather than save, is very tempting.
However, Simon Rose of Save our Savers explains why this is false economy: “Getting a loan to buy something is simply saving in arrears; the difference is that you are paying interest, not receiving it. That makes it more expensive to finance a purchase through debt than by saving in advance.”
“Take, for instance, the difference between buying an item using a credit card charging 20% interest and saving ahead in a best-buy instant access savings account paying 1.5%. The basic rate taxpayer would receive 1.2% interest net and would need, over a year of regular saving of £165.59 a month, to put by £1,987.04.”
“Borrowing on a credit card charging an annual 20% and if paid off in monthly instalments would require £185.27 a month, making a total payment in the year of £2,223.23.”
“Both saver and borrower have made regular payments, but the saver has paid £19.68 less a month, his total outgoings being £236.19 less, a saving of over 10%.”
“Even with today’s low interest rates, it makes financial sense to save for an item when possible.”