It’s a well-known fact that rainy day savings are important. These rainy days can be anything from financial and medical emergencies to weddings, university fees, or moving house. Despite the importance of savings being well-known, are people in the UK ready for that rainy day?
The attitude of people towards savings unsurprisingly differs vastly depending on your age and your financial situation. However, research suggests that around 15% of people in the UK have no savings at all, while one in three people have less than £1,500 put away.
So, a large number of people in the UK are not inclined towards savings and take it perhaps less seriously as they should. Experts advise individuals to save at least three months worth of living expenses – the majority of people in the UK are not at this recommended level. There can be multiple reasons for not saving enough, but insufficient earnings are always among the top reasons.
Overall, the data on average savings in the UK is worrisome. Over 40% of people do not have enough put away to support themselves for a month in the absence of income. The number of adult ISAs is going down, while the number of people with no savings at all is rising. Although the number of junior ISAs is going up, the average amount invested in them is plummeting. Bank balances are dwindling, and so are the average savings figures.
Average savings by age in the UK
Based on data from the Office of National Statistics, the average amount people have in savings predictably goes up as they get older. Younger people have less in savings for a number of reasons like student loans, low salaries and high expenses, while the average amount in savings increases as people get closer to their retirement age.
Of people between the age of 22 and 29 years, about 40% have no savings at all, while around 10% have savings between £2,000 and £3,000. Only around 25% have saved more than £6,000.
On the other hand, among those aged above 55, only 2.23% have no savings at all. The average savings for those between 18 and 24 in the UK stands at £2,481, while for 25 to 34-year-olds it stands at £3,544, which increases to £5,995 for those between 35 and 44. The highest average savings by age in the UK is for the people above 55 years of age, at £20,028, closely followed by an average of £11,013 for people between 45 and 54.
Average savings by income in the UK
Income is another critical metric that determines the average savings of people in the UK. There is, understandably, a direct correlation between income and savings. People with higher incomes have more disposable cash and can therefore save more compared with those on lower incomes. However, how much money people actually save, despite their incomes, depends on several factors along with their attitude towards savings in general. Also, people with high incomes tend to have high expenses too and will also need more savings for their retirement.
On average, low-income families in the UK have £95 in savings, while the high-income families have an average of £62,885 in savings. The gap between the low-income and high-income households has increased over time and has become even wider thanks to the ongoing coronavirus pandemic.
How much should you save each month?
Retirement data can be compared and contrasted with expected savings data to get a clear picture of how much people should be saving each month. If an individual plans for a retirement income of £19,000 per year, they need to save around £7,300 every year and hit retirement with at least £266,000 in savings.
Therefore, the average savings by age should be £51,434 at the age of 30, going up to £124,911 by the age of 40 and £198,390 by the age of 50. The average Brit is some way away from the expected savings and needs to save a lot more to reach the recommended levels of savings in the UK.
Savings statistics in the UK: Average savings by gender and region
Average savings in the UK differ vastly based on some other metrics as well. These include gender and region, in addition to age and income. Generally, there is an understanding that women usually have less in savings than men, most likely due to issues like the gender pay gap.
On average, women in the UK have savings of £6,869, while men have almost double this on average, at £13,140. It is important to note that although more men have savings when compared to women, the women that do tend to have larger amounts saved than men.
Similarly, region or location is an important determinant of average savings in the UK. According to research, the lowest average savers in the UK belong to the East Midlands, while the highest bracket can be found in London. The average savings of people in the East Midlands is £6,438, compared to average savings of £28,978 in London. The second-lowest region is Northern Ireland, at £6,710, while the second-highest region is the West Midlands, at an average savings of £13,318. Such a dramatic disparity in average savings by region in the UK can be attributed to employment opportunities and a host of other socioeconomic factors.
Factors that affect average savings
The average savings in any country are created by a number of contributing factors. Some factors influence savings at the macro level, while many others have an impact on an individual level. On a larger scale, average savings are impacted by the economic growth of a nation and the prevalent interest rates. While higher interest rates make savings more attractive and increase the average savings, higher economic growth tends to increase spending and reduce savings. Additionally, high levels of inflation may discourage cash savings but increase the appeal of assets.
From an individual perspective, savings are heavily influenced by cultural trends. Some cultures have a tendency for higher saving, while others have a spending culture. Levels of income and average age play a significant role in determining the average savings of a country, too. The average savings are less for younger people and they steadily increase until the age of 50-60. They then go down post-retirement as the income typically stops altogether. Similarly, higher income levels also enable higher savings when compared to lower-income households.
Quick ways to increase your savings
One look at the data around average savings in the UK and you can see that the situation is problematic. Far more than an acceptable number of people in the UK have no savings at all, while many have insufficient savings to protect them in the event of a loss of income. Therefore, the need for the average person to consider saving for rainy days has never been greater.
The smartest way to save is ‘saving before spending’. This means putting money into savings immediately after payday and then spending the remaining amount accordingly. Current technology also means people can automate the saving process in its entirety. Various smartphone apps are equipped to analyse individuals’ income and spending habits, decide on the appropriate amount of savings, and deduct the decided amount automatically every month.
Another smart way to save is to make savings as secure as possible, while also making them relatively inaccessible so that you don’t dip into them as soon as you fall short of money or have to make an impulse purchase. It is important to follow the quick methods to increase your savings so that you are prepared for emergencies and enter your retirement with a comfortable amount of savings to enjoy your best years.