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The value of choosing the savings path

The value of choosing the savings path

Category: Savings

Updated: 06/03/2014
First Published: 06/03/2014

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 It is now over 6 months old so the content may be out of date.

The importance of saving is constantly drummed into us, but what happens if you are unable to save anything at all?

It's reassuring to have a few pounds stashed away for life's little emergencies, but it turns out that nearly one in five people (19%) don't have any savings whatsoever, and this has risen year-on-year, according to Scottish Widows' latest savings report.

Happily for those who do have savings (67%), the story has improved with the average amount people have put away rising year-on-year and increasing by £175 from £10,033 in 2012 to £10,208 in 2013.

There seems to be a widening gap, however, between those who are able to save for a rainy day and those who can't manage to put any of their income away. This highlights the importance of getting into a good savings habit and once you begin to put just a little away in a savings account regularly it really can build up; you probably won't notice much of an impact on your day to day life, but it will make all the difference to your feeling of security when you have a little nest egg.

More than half of the people surveyed (54%) say they are saving less than two years ago and it looks as if family pressures could be one cause of this. We all know the term "bank of mum and dad" and it seems that families really are becoming the financial crutch for those struggling, with 41% of people questioned claiming to have loaned a substantial amount of money to family members.

It appears to be the middle age bracket of 35 – 44 year-olds that are finding the most strain on their finances with one in four of this group unable to save anything whatsoever, perhaps being the result of helping out the generations above and below them.

Around 23% of parents and grandparents say they are saving less as a result of having to lend to family members and a fifth (17%) are cutting back on their day-to-day living costs in order to do this.

Those aged 35 – 44 were also the group with the highest amount of debt, with the average amount being carried over each month standing at £5,935, clearly being a major hindrance on the ability to save.

David Lascelles, savings expert at Scottish Widows, said: "Our research shows that many people are still only thinking in the short term, for instance, almost half of people said they prefer to spend their money rather than save, and almost two-thirds said they know they are not saving sufficiently for their long term needs. This problem is exacerbated by family pressures that eat further into people's savings, particularly for those in the middle age groups.

"We need to tackle this culture of short-termism and encourage people to adjust their priorities so they are thinking about protecting themselves for the future, and not just for the here and now."

Cutting back by perhaps forgoing the odd night out, making do with what you've got rather than jumping on the latest new gadgets, or even making small changes like packing your lunch up for work rather than buying out every day, can make all the difference. But make sure that you put away what you save, however small it may seem initially, and think about opening a regular savings account or start putting money away in a tax-free ISA, and you will soon begin to reap the benefits of your frugality and find yourself heading down the profitable savings path.

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