You are here: Home -

Investors shun traditional savings accounts in favour of riskier products

0
Written by: Paloma Kubiak
26/04/2016
Dismal savings rates mean Brits aren’t setting enough money aside for emergencies and many are turning to riskier investments for better returns, research reveals.

It found a third of people don’t have enough savings to cover unexpected bills, such as car or home repairs. To cover these costs, 40% would be forced to rely on credit, 32% would ask a parent and 28% would need to wait to fix the problem until they had enough saved up.

However, the findings from MoneySuperMarket.com suggest people are trying to save despite the average savings account paying less than 1%.

Four out of five of the 2,000 people polled said they were currently saving, and were managing to put away an average of £301 per month.

Those aged 18-34 save the most, at £416 per month, while 35-54 year olds save £285. For over 55s, the average figure is £231 each per month.

The study also showed that people are more optimistic about their future savings habits, with 25% of all consumers expecting to save more money next year, compared with 14% who think they’ll save less.

However, with the Bank of England’s base rate stuck at a seven-year all-time low, many savers have shunned the use of traditional savings accounts, with 15% turning to riskier investment products to get a better return on their money.

One in six have moved their savings to a current account with a high credit interest rate, while 13% have moved their money into longer term savings or investments to get a better interest rate.

Ten per cent are now using a stocks and shares ISA and a further 7% are taking a riskier approach to saving, in the hope of getting better returns.

Of those who’ve adopted riskier approaches, 52% said they were happy with their decision to change their habits because of low interest rates and 29% said they’d seen better rates of return too.

But the study also found some have been put off saving altogether – 13% have withdrawn money from their savings and spent it instead, 11% have actively chosen to put less into their savings pot and 5% have even withdrawn their money and hidden it at home as they now don’t see the point of saving.

Saving small is better than none

Kevin Mountford, head of banking at MoneySuperMarket, said: “Savers have suffered for far too long now due to low interest rates and it’s really worrying that some have stopped saving altogether.

“Although ISAs, easy access accounts and fixed rate bonds might not be providing massive returns at the moment, saving a small amount of money is far better than saving none at all, especially to cover any unexpected bills. Having a range of savings options is a good strategy – rather than putting all your eggs in one basket – and by mixing traditional savings, cash, stocks & shares ISAs and in-credit interest current accounts, you will get more bang for your buck.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

Your rights for refunds if travel is affected by strikes

There have been a wave of strikes this year across many different industries, and more are planned over Christ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week