A third of consumers saved nothing last year | moneyfacts.co.uk

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Published: 02/02/2017
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How much have you been able to save in the last year? If you're like one of the 29% surveyed by StepChange Debt Charity, the answer could be zero, with many people finding it increasingly difficult to set money aside.

No umbrella

The research highlights the difficulties many people face in being able to save sufficiently – or indeed at all – which could leave almost a third of Brits open to financial difficulty should they face a reduction in income. After all, that 29% said they had no spare money whatsoever to squirrel away as rainy day savings in any of the previous 12 months, which means they could have a limited financial buffer.

Even for those who can save, the picture is far from rosy. Indeed, a further 19% of respondents said that even when they could save, they had just £50 or less available each month to put away, which means many savings pots could still be worryingly small – certainly well below the three months' worth of income that's recommended people hold as an emergency buffer.

It's worse for those on low incomes, too. The proportion of those unable to save in the last 12 months rose to 45% among those earning less than £20,000 per year, with a third saying they wouldn't be able to survive financially for more than a month if their income dropped by a quarter, up from 20% overall.

Incentives needed

The charity believes that more needs to be done to encourage people to save, particularly those on low incomes, and is calling on the Government to adapt the auto-enrolment system to include a "precautionary savings element". This could help boost emergency savings levels – 35% of respondents said such a change would make them more likely to save – but so, too, could improving Help to Save.

The scheme, which is still in consultation, is being designed to encourage saving among low earners, with the promise of a Government top-up to boost savings pots: anyone in work and in receipt of Universal Credit or Working Tax Credits can save up to £50 a month and receive a 50% bonus after two years, worth up to £600. They'll then be able to repeat this for the next two-year period, resulting in a Government bonus of up to £1,200, and a total savings pot (if they kept up with the £50/month goal) of £3,600 after four years.

However, while it sounds good, the charity expects that only one in seven of those eligible will actually take advantage of the scheme, and is therefore calling on the Government to tackle the anticipated low take-up and ensure maximum benefit for those eligible.

"We are seeing household borrowing increasing, reduced social safety nets and rising inflation," said Mike O'Connor, chief executive of StepChange Debt Charity. "Not having a precautionary savings pot means that people are extremely vulnerable to falling into severe problem debt. For too many people stretched budgets leave no room to put even a little aside as they struggle to get by, just about managing month after month. A drop in income or an unexpected expense pushes people over a cliff from managing to crisis.

"Help to Save is a scheme we both campaigned for and welcomed, but a better plan is required to ensure that it meets the needs of those it is designed to support. The pensions' auto-enrolment system has proved successful at overcoming barriers to pension saving, and building a rainy day savings element into the scheme could help overcome the same barriers to shorter term savings, helping insulate families from financial shocks and preventing the slide into problem debt."

What can you do?

If you're struggling to make ends meet, saving anything at all could feel like an impossibility, but there are things that you can do. One of the first steps should be to take a cold, hard look at your finances, and ideally, keep track of everything you spend – we reported earlier this week that monitoring your spending could be the key to changing behaviour, and could even result in more money to put aside each month.

Remember that even saving small amounts can add up, and if you've got the right savings account in which to put those pennies, your pot could soon accumulate. Start the process by taking a look at our savings Best Buys to find a deal that suits your needs – an easy access account could be the perfect home for an emergency fund – and hopefully you'll be able to save at least something in the next 12 months.


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