Family savings falling short

Category: Savings
Date: 7/16/2010

Most families accumulated little in the way of savings in the run up to the financial crisis, despite consistent rises in their incomes, new research has revealed.

According to a report by the Institute for Fiscal Studies, the average amount of wealth built up by families between 2000 and 2005 increased from around £750 to £1,100.

Younger families and those on the lowest incomes had particularly low rates of saving during this time.

The report found a substantial variation in savings rates across the population, with a large proportion of wealth held by a relatively small proportion of families.

Savings tended to rise with age, except for in the very oldest age groups.

However, for most families, the vast majority of the wealth they held was in their home and pensions, rather than easily accessible assets such as cash and investments.

"Many families, in particular the youngest families and those on the lowest incomes had very low rates of saving between 2000 and 2005," said Cormac O'Dea, research economist at the Institute for Fiscal Studies and one of the report's authors.

"This period was one during which incomes grew substantially, but financial wealth, at least for most households, barely increased at all.

"For homeowners, increases in property prices between 2000 and 2005 led to large increases in wealth that tended to dwarf any active saving that they did."

For families in particular, having savings that can be easily accessed when they are needed is essential.

Saving into a cash ISA is an ideal way to build up a so called 'rainy day' fund.

Household names such as Santander, Halifax, Sainsbury's Finance, Nationwide and Birmingham Midshires all currently offer some of the best cash ISA rates around.

Check out our cash ISA best buy chart to find the account that best suits you.

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