Did you raid the savings pot to cover your festive spend? If so, you're not alone. Research from Halifax has revealed that a large number of Christmas shoppers had to unexpectedly use their savings to help cover the cost, while many others were unable to add to their nest egg during the holiday season.
The figures show that 81% of those surveyed currently have some form of savings, with the average balance being £17,945. However, this is significantly below the average for the same period the previous year, when the typical savings pot stood at £23,790.
Only 25% of savers surveyed maintained a buffer on their nest egg – the average amount they try not to let their savings dip below stands at £10,797, the equivalent of just under five months' pay – however the vast majority don't maintain a minimum balance. Even cautious savers aren't always immune to unexpected costs, as 19% of those that do set a buffer admitted to dropping below the limit since October last year.
Savings pots have clearly had a lot to compete with recently, and even those that do have savings will have found it difficult to keep them topped up. In fact, around 30% haven't saved anything at all in the past three months, while 26% were forced to raid their savings to pay for unexpected costs or bills, amounting to an average of £1,405 over the three-month period.
The main reason for dipping into savings was for a holiday or to cover the costs of emergency home or car repairs, with 14% of raiders stating one of these two reasons. A further 11% cited overspending on their current account, while the same amount admitted to splurging on impulse gifts or luxury shopping, suggesting that overspending at Christmas was a key factor. Arguably, this was fuelled by Black Friday, with heavy discounting encouraging shoppers to start spending early – and spend more.
Philip Robinson, savings director at Halifax, commented on the findings: "Improving consumer confidence in 2014 boosted spending, particularly in the latter months of the year, however it seems to have had a knock on effect with low levels of savings over the same period.
"Saving regularly is important to building and maintaining a savings base, which will protect households in the event of a change in circumstances or unexpected expenses. Whilst we expect a certain level of raiding of savings in the run up to Christmas, if savers' balances continue to decrease year on year it would represent a worrying trend for household finances."
Unfortunately, a lot of people seem to be tempted to dip into their savings pots during the festive period, but the rising cost of living could also be taking its toll on a daily basis. People are understandably finding it difficult to put the necessary amount of cash away as a result, but if you're simply too easily tempted when it comes to your savings pot, there are things you can do.
What about locking your money away in a fixed rate account? Some accounts charge hefty interest penalties if you choose to access your money before the end of the term, while others simply won't allow it, so it could be a great choice for those saving for something big. Alternatively, setting up a regular savings account could be the perfect way to kickstart a savings habit – many offer higher rates of interest than their traditional counterparts, on the provision that you put in a minimum amount each month.
Of course, you'll still want an easy access account for those emergencies, but just try to avoid raiding it! Building your savings balance can give valuable peace of mind, and if you start planning your festive spend early and have a dedicated savings account for this very purpose, you hopefully won't have the temptation to raid the emergency fund when the time comes.
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