It found that more than £360bn is sitting in UK current and savings accounts earning returns of 1% or less.
The building society’s research suggests the average person in the UK is planning to spend an average of £774 on Christmas this year. More than half (51%) of those polled said they would spend up to £1,000 on gifts, food, decorations and entertaining.
Millions of savers could have covered this cost by getting a better return on their money – and using the interest earned to pay for Christmas.
In January, Yorkshire Building Society analysed data from CACI’s Current Account & Savings Database (CSDB) and found there was £380bn held in accounts paying 1% interest or less. That figure has now reduced by 5%, meaning there is still more than £362bn sitting in low-paying accounts.
The research also found that almost a fifth (18%) of people said they would rely on some form of borrowing to cover the cost of Christmas and more than a third (36%) said it would take them at least a year to pay the amount borrowed back.
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Many of the respondents cited “cost-of-living pressures” and “not having sufficient funds to cover the costs” as the main reasons for relying on credit.
Chris Irwin, director of savings at Yorkshire Building Society, said: “The cost of Christmas, for many, is growing each year. We started the year highlighting that keeping large amounts of funds in low-paying current accounts has become a costly mistake for millions.
“Despite the attention savings interest rates continue to have, it’s surprising that there [continue] to be such large pockets of people who are missing out on savings interest, which in turn could have easily covered the cost of the festive period for many.
“For those that don’t have savings that could generate additional income, starting a regular saver now would give shoppers a healthy sum to draw on for Christmas next year – without having to rely on credit.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Consumers debating whether to start a savings pot should act now; it is never too late to overhaul their usual habits and taking just one step can put them back in charge of their financial wellbeing. Building an emergency fund or saving for a specific goal is simple and easy to do, so anyone who has struggled to save this year could kick-start the habit for 2025 and rely less on short-term credit to cover the festivities.
“Savers may find it convenient to stash their cash in their current account, but the stark reality is that these do not work hard enough for them to earn decent interest, nor do they really offer the right structure to instil the savings habit. Consumers need to shake any apathy they have and take a step back to decide how their money could work harder for them.”
