Despite recent reports suggesting that savings levels are increasing, for some people, it isn't that simple. Many are still having to tighten the purse strings and are unable to put much away, with research from HSBC finding that 24% of households have no savings whatsoever.
This is a worrying statistic, as it means many could come into financial difficulty should an emergency hit. Even those that do have money in a savings account may not have enough to be fully prepared, with 33% of respondents having just £250 or less set aside as a financial safety net – based on average outgoings, this would last just four days if they were to unexpectedly lose their income.
Almost a third (30%) admitted that they wouldn't be able to pay their mortgage if they lost their job, and even though 44% had a savings pot of £2,000 or less, even this wouldn't last long. The average Brit has essential outgoings of £954 per month and monthly debt payments of £514, so £2,000 wouldn't go far.
In this scenario, 26% would be forced to apply for benefits, while 9% would turn to unsecured lending (such as credit cards or personal loans) and 8% would rely on their overdraft. A further 12% would rely on their partner, friends or family while 10% would borrow the money from family outright, and only 9% would be covered by suitable income protection insurance – down by 3% since 2013.
Debbie Thomas, head of savings at HSBC, commented: "As 91% of the population does not have their income protected by an insurance product, making sure you have a sufficient financial safety net is crucial. This cuts the risk of running into financial trouble should you lose your job or be unable to work, and means you don't have to resort to methods that could leave you in debt. As a general rule, a minimum of three months' salary makes for a solid financial backup."
Luckily, it needn't be that difficult to build that financial buffer. Even putting aside £50 a month could soon add up – it may sound like a lot, but it's only £12.50 per week, a sum that could easily be saved by making a few changes. Even cutting back on things like takeaway coffees could make a huge difference, and if you use vouchers and coupons, you could save on your everyday spending, too.
One of the most important things you can do is reduce your tax liability – and that means, if you can, putting your savings in an ISA rather than a traditional savings account. Additional research from Santander has found that 21% of consumers have a taxable savings account but no ISA, meaning they're unnecessarily putting cash into the taxman's pocket.
Over time, this could have a serious impact on your savings pot and could mean it's even harder to build a suitable financial buffer, so make the most of your tax-free allowance and you could find your savings mount up even quicker.
Find the best savings rates to help reach your goal
Check out the best cash ISAs
Consider regular savings accounts to get into the habit
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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