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Don’t let your savings pot run too low

Don’t let your savings pot run too low

Category: Savings

Updated: 28/01/2014
First Published: 28/01/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Two reports published in the last week have highlighted the poor state of the nation's savings habits, with Halifax finding that a worrying one in three people haven't saved anything at all in the last three months while the Money Advice Service found that 33% have no savings whatsoever – making us a nation "living on the edge".

Are you a saver or a raider?

The Halifax report found that savers are becoming increasingly likely to dip into their savings, and although they put away around 13% more between November 2013 and January 2014 than they did the previous year, they raided more money (up by 34%) and were less inclined to protect their savings pot.

In fact, 28% made no effort at all to defend their deposits while 73% had no buffer limit on their savings, meaning almost three quarters of those surveyed made no effort to keep their reserves above a set amount. Add into the fact that 33% of those surveyed saved nothing at all over the festive season – up from 23% last year – and it's clear that a lot of people are underprepared.

Don't get caught out

Emergency costs can be the biggest drain on savings pots, with the report finding that emergency or car repairs caught out 19% of savers. This is backed up by research from the Money Advice Service which found that 71% of homeowners were hit by unexpected bills last year, with the average unforeseen cost totalling £1,101 per household. Considering the report found that 33% have no contingency savings and a further 39% haven't saved anything in six months, it highlights the strain put on a lot of households.

But, it isn't all about emergencies – the Halifax report found that 13% of those surveyed (up from 8% the previous year) are raiding their savings in order to splash out on luxuries or impulse buys, with those having nothing specific to save for being more likely to spend their hard-earned savings.

However, it's not all doom and gloom. Some savers do make efforts to preserve their pots with 31% of those surveyed trying to cut costs, and even making small, regular deposits into a savings account can soon add up into a viable contingency fund.

Sylvia Waycot, editor of Moneyfacts.co.uk, had this advice:

"The first rule of savings is making sure you have an emergency fund; one that allows you to access your cash quickly and easily without any penalties. This means an easy access account and, whilst the interest won't set the world alight, it will keep your money safe until you need it. Saving in this way also means you don't need to beat yourself up if you have to dip into it for life's sudden surprises and let's face it, there are always going to be those."

What Next?

Find the best savings rates with our best buys or savings search

Check out our guide - How to start saving an emergency fund

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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