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New findings reveal that people in the UK – especially younger ones – have been lacking financial confidence of late, and savings are suffering as a result. Indeed, the survey by specialist financial mutual Wesleyan found that 28% are saving less now than they were at this time a year ago.
In comparison, 20% are saving more, which doesn't sound like such a big difference, but when you look at those aged between 25 and 34 (millennials), a whole 33% are saving less compared to May 2016. Considering this age group is more likely to still need to save up for their first home, and will also likely be more dependent on their own private pension pot in later life, this is a worrying trend.
Some of this could be due to uncertainty about the wider political and economic situation, with 21% admitting that the Brexit vote has made them more cautious and reduced their appetite for risk. And with incomes stagnating while inflation – and therefore the cost of living – is going up, it's not too hard to imagine that people may have less to put away now than they did a year ago.
Unfortunately, those savers who do still have money to squirrel away are tending to prioritise short-term purchases over long-term saving, with 23% saving towards their annual holiday and 16% towards a new car. In contrast, only 15% are saving towards retirement and just 12% are saving up to pay the deposit for their first home.
At least the biggest percentage, 27%, still see a rainy-day fund as their number one savings priority, but given that even the Best Buy easy access account rates have been disappointing of late, this prudent savings pot won't be able to offer much of a return. Maybe that's why 22% are actually using their current account to hold their long-term savings.
Given that high interest current accounts allow constant access and some offer higher interest rates than savings accounts at the moment, this is not a bad place to store some savings, but for bigger amounts a longer-term savings vehicle of some sort would still be preferable. And yet, just 33% of people are using ISAs for long-term savings, a marked change from the past, when ISAs were the savings option of choice for many.
Vicki Wentworth, chief customer and strategy officer at Wesleyan, commented: "Given the broader economic and political context it's not surprising that people are lacking confidence about their saving potential, and this has led to an interesting shift with more focusing on short-term financial goals.
"Despite this reaction, savers shouldn't lose sight of the need for long-term financial planning. Even with continuing low interest rates there are steps they can take to invest in their futures and make the most of their money, particularly for retirement."
While it may be tempting to give up on saving altogether and simply spend the money on the things that you need right now, don't lose sight of the bigger, longer-term picture. Squirreling away funds now, such as in a Lifetime or Help to Buy ISA for a house deposit, or perhaps in a regular savings account (which are still seeing interest rates above inflation), could make all the difference for your future.
Don't forget about investing for your retirement either, and if you're happy to risk your funds to potentially gain bigger returns, a stocks & shares ISA may be for you.
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