We all know the importance of saving, whether you want to build up a nest egg or an emergency fund (or ideally both), and happily it seems that a lot of people are catching onto the idea.
Research from HSBC has revealed a clear increase in savings levels over the past year, with the average savings pot increasing by 15% to hit a healthy £20,844, much better than the £17,664 recorded in 2013. People are becoming more astute when it comes to saving too with over half (51%) of respondents adding more to their savings pots than they withdrew – up from 39% in 2013 – while 43% now make regular additions to their accounts, compared to 40% a year ago.
However, the majority (57%) still only add to their savings on an ad hoc basis (up 1% since 2013), but nonetheless 74% now manage to save more than £100 per month – an encouraging figure, as even relatively small amounts can quickly add up to a sizeable sum, particularly with compound interest being added in.
What's even more encouraging is that younger people are getting in on the action too. Additional research from Scottish Friendly has revealed that 66% of those aged 18-24 now save regularly, putting aside an average of £204 per month, with the typical savings pot totalling £3,200.
It's a promising figure and should perhaps change the perception that young people spend more than they save, and with 55% having no set reason as to why they're saving it would suggest that many are realising the importance of having a financial buffer in place. They're not looking too long-term however with less than 1% saying their financial priority is putting money into a pension, although encouragingly half do have pensions provision through the likes of workplace schemes.
So, are you getting in on the savings bandwagon? Hopefully, yes, and if you find you've got money left over each month it's a great opportunity to set yourself up with a nice little fallback fund. The launch of the new ISA offers even more potential to generate returns as you can save even more tax-free, but don't always limit yourself to cash.
Despite cash deposits continuing to be the most popular form of saving with 61% opting for this type of account (according to HSBC), the proportion of people with cash savings accounts has actually fallen by 7% since 2013. The number of people with alternative investments, meanwhile, at 24%, has seen an 11% rise over the same period, highlighting the growing popularity of alternative savings vehicles.
Stocks and shares saving is becoming particularly popular, and has seen the greatest increase in value over the last year. The average amount saved in this form of investment has reached an average of £6,391, up 40% on last year when it stood at £4,560. Again, the NISA changes could be a great chance to give this form of saving a go, as there's always the option to transfer your savings back into cash should you change your mind.
This form of saving has the potential to offer much better returns, as long as you're comfortable with the increased level of risk associated with it, so sticking to cash could well mean you're missing out. There's another reason you could be missing out too – by not comparing the options and switching account.
According to Bank of Cyprus UK, half of savers have never switched savings provider while 35% have been with the same banking provider for 11 years or more – meaning many could be missing out on the best rates.
Despite the fact that nearly 6 in 10 say they shop around for the best rate, 22% admitted to never comparing their savings rate while 26% only did so once a year, and it seems that looking doesn't necessarily translate into switching. This could be a big mistake, particularly with a lot of older savings accounts offering rock-bottom rates, and if you don't compare alternatives – or take the plunge and switch – you could well be losing out.
Tony Leahy, of Bank of Cyprus UK, commented: "The inertia reported by savers may be partly to do with interest rates continuing at an all-time low and the lack of a better deal elsewhere. The new ISA allowance may encourage people to review their arrangements to ensure they are getting a good rate and are making the most of this improved tax-free savings opportunity."
Hopefully the changes will have the desired impact and will encourage people to look around, because if you don't know what else is out there, how do you know you're getting the best rates? Rates may not be setting the world on fire but there are still some good deals to be found, and even small amounts of interest can soon add up. Check out our best buy tables to see if you can find the account for you, and see if you can add to the tally of savers.
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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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