Two surveys have come out this week that reveal the worrying state of the nation's savings habits, with a large number of people having rainy day or emergency funds that wouldn't last a week – let alone the three months we should ideally be saving for.
Research from HSBC has revealed that over a third of respondents (or 34% of the 2,035 people surveyed) have just £250 or less set aside as a financial safety net, with a particularly worrying 25% of those having no savings whatsoever – up from 19% in 2012. This means a lot of people would be left facing severe financial difficulty in the face of an emergency, and with average monthly outgoings being £1,500 a modest savings pot of £250 would barely last five days.
In fact, 31% of respondents have said they wouldn't be able to cover their bills or rent/mortgage payments should they unexpectedly lose their job, with an increasingly large proportion saying they'd turn to credit (17%, up from 11% in 2012).
This indicates that the number of those unprepared for financial emergencies has risen steadily over the past year, and additional research from NS&I backs up these findings.
The latest NS&I Quarterly Savings Survey of 2,489 Brits has revealed that only 53% think they've got enough savings to cope in an emergency – potentially meaning that almost half of British savers are seriously underprepared. Perhaps more worrying, nearly one in ten (9%) don't think they need an emergency fund at all.
Experts believe that people should have the equivalent of three months' salary in their savings pot to constitute an emergency fund but just 45% of those surveyed have this amount put aside, while 26% of those that agree with the three-month figure admit that they wouldn't have enough to cope.
The survey also found that around one in four people dip into their emergency fund when they didn't really need to, indicating that although some people save for a rainy day they don't always wait for the rain to spend it.
"Having a 'rainy day' fund is not a luxury; it is essential and should be the first savings pot you build up. Never tie the money up in accounts where you can't get quick access as that will just cause additional stress and possible loss of interest. Once you have three months' money saved you can look to creating a second 'pot', one where you can make your money work a bit harder for you.
"If you do have an emergency, don't feel guilty about dipping into your emergency savings as that is what they are for. However, make it a priority to build the fund back up so as soon as possible so that it is still able to help you overcome life's many financial hurdles."
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