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Where does your money go?

Where does your money go?

Category: Savings

Updated: 12/03/2015
First Published: 12/03/2015

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 It is now over 6 months old so the content may be out of date.

Seeing your paypacket go into your account is always going to raise your spirits, but by the end of the month you may be left wondering where all that cash went. To find out, Octopus Investments carried out some research to discover how much we spend, save and invest – and some interesting results were found.

Spending, saving and investing

According to the Octopus Financial Fitness Monitor, the balance between splashing the cash, saving and investing does not vary much between different income groups, putting paid to the notion that only the wealthy can afford to create a nest egg. In fact, those with incomes between £15,000 and £70,000 had the same spend/save/invest proportions.

In total, people in the UK put away over 40% of their free cash into savings or investments – an impressive amount considering the high cost of living. Londoners were found to be the biggest savers, putting 39.69% of their discretionary income into a savings pot and another 16.85% into investments. In contrast, those living in the East Midlands were the smallest savers, putting away 32.75% of their leftover cash (after fixed costs and debts) into savings and just 2.60% into investments.

On average, a full-time worker in the UK dedicates the vast majority of their income to paying debt and fixed costs (29.72% and 26.85% respectively). The next largest proportion is used as spending money, which is around 24.37% of their total income, with the remainder put into savings and investments. Interestingly, the research found that this breakdown differed notably from that of part-time workers. The figures revealed that, while part-time workers earned around a third less than their full-time counterparts, they actually use a far smaller proportion of their income on debts and fixed costs, as well as spending. They were also found to invest twice as much (9.51% of income as opposed to 4.45%).

Building a nest egg

Clearly, this research highlights that we are becoming a nation of savers, with people on a range of incomes putting money aside for a rainy day. However, this research also reveals that many of us are still timid when it comes to investments, with cash savings far outstripping the money dedicated to this sector.

While putting money away in a savings account is not to be sniffed at, it may not necessarily be the most effective way to build up a fund. Indeed, with base rate remaining on hold at 0.5% for another month (the sixth consecutive year), there is a risk that money put away in savings accounts may be eroded.

So, if you want to make the most of your disposable income, it may be time to start taking a look at the investment market. A stocks & shares ISA may be the best place to start, as the income derived from this investment will be free from the taxman, and the potential returns can be impressive. You can read our guide on stocks & shares ISAs to find out what they involve. Of course, investments always carry risk, but if you weigh up your options carefully, you could earn a decent return rather than allowing your precious savings to gather dust.

What next?

Take a look at some stocks & shares ISAs on the market

Read our guide on stocks & shares investments

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.