Workers need a £4,000 pay rise to boost savings
The challenger bank’s research found half (51 per cent) of UK workers received a pay rise in the past year and nearly a third (29 per cent) got a bonus.
Charter Savings Bank asked workers to estimate how much of a pay boost it would take to increase or start saving and found the average increase was £3,889, although 31 per cent said they would save any additional money. When it comes to bonuses, 36 per cent said they would save any additional cash.
Despite not necessarily receiving the hoped for £4,000 pay rise, the research shows workers do try to set aside extra cash. Of those who received a pay rise recently, a fifth (20 per cent) saved all the extra money and (10 per cent) saved some.
The research shows the pay rise effect does not last long for those who don’t increase savings. More than two out of five (44 per cent) say they don’t feel they have any extra cash immediately, while 73 per cent feel no better off after three months. After 12 months just one in six (18 per cent) of those who had received a recent pay rise still felt like they had extra money despite not saving any.
For nearly one in five (17 per cent) workers pay rises simply allow them to catch up as their spending was outstripping their salary, while 12 per cent use the cash to clear debts. Around 11 per cent used their pay rise to increase lifestyle spending, while 9 per cent used it to pay for a holiday. The most popular use of a bonus is to save the extra money (20 per cent), but the second most popular is to use it for a holiday (16 per cent).
Paul Whitlock, executive director of savings at Charter Savings Bank, said: “It is encouraging to see that even though they aren’t earning as much as they would like, UK workers are still trying their best to save any additional money, whether that be from a pay rise or bonus.
“As our research shows it takes just three months for the majority of people to feel like they didn’t have extra money, it’s important to use this extra cash for something immediately, whether that be paying off debts or putting into a savings account. Otherwise the money will soon be wrapped up into regular spending.
“It may not feel worth saving extra money if it is only a small amount but small, regular amounts soon build up and it can be satisfying seeing the money grow.”