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But the study also found some have been put off saving altogether – 13% have withdrawn money from their savings and spent it instead, 11% have actively chosen to put less into their savings pot and 5% have even withdrawn their money and hidden it at home as they now don’t see the point of saving.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