2nd February 2015
Britons did their savings accounts no favours in the run up to Christmas as a third admitted to not adding anything to their nest egg, claims new research from Halifax.
The lender’s analysis found that one in four savers had to unexpectedly raid their accounts to cover additional spending,
Presently some 81% of British adults say that they have some form of savings, with the average balance stated at just below £18,000 during the final three months of 2014, significantly below the average for the same period the previous year, which stood at almost £24,000.
However, of those with savings around a third have not saved anything in the past three months. Additionally, the average amount saved by those with savings over the past three months stands at £766, slightly lower than the £770 saved over the same period in 2013.
At the same time one in four, or 26%, of savers say that they were forced to raid their savings to pay for unexpected costs or bills, with an average of £1,405 coming out of savings over the same period.
|Region||Average savings in past three months||Average amount raided from savings||% who saved (Qtr 4)||% who raided (Qtr 4)|
|Wales & South West||£581||£1,307||67%||31%|
The main reason for dipping into savings was for a holiday or to cover the costs of emergency home or car repairs with 14% of raiders stating one of these two reasons. Additionally, 11% cited overspending on their current account and the same on impulse gifts or luxury shopping indicating that overspending at Christmas was likely a key factor.
Saving levels falling short
Based on the latest Halifax data, savers have an average balance equivalent to 35% of gross annual earnings. However, the research indicates that consumers were saving just over £250 a month on average in the last quarter, meaning they managed to save an amount equivalent to just 11% of their gross monthly income in the three months to December, well below the long run average.
The weakness in savings during the final months of 2014 is likely to have been influenced by heavy discounting by UK retailers around “Black Friday”, which not only saw consumers bring forward their Christmas spending, but encouraged them to spend even more.
Only 25% of savers say that they maintain a buffer limit on their nest egg, with the average amount they try not to let their savings dip below standing at over £10,000 for the fourth quarter of 2014.
The average buffer limit currently stands at the equivalent of 39% of gross annual average earnings, or just under five months pay. However, only a quarter of savers maintain a buffer, with the vast majority (three quarters) not maintaining a minimum balance. Additionally, of these cautious savers who do try to maintain a buffer, one in five (19%) has admitted to dropping below the limit they have set for themselves since October last year.
Commenting on the research Philip Robinson, savings director, Halifax, said: “Improving consumer confidence in 2014 boosted spending, particularly in the latter months of the year, however it seems to have had a knock on effect with low levels of savings over the same period.
“Saving regularly is important to building and maintaining a savings base, which will protect households in the event of a change in circumstances or unexpected expenses. Whilst we expect a certain level of raiding of savings in the run up to Christmas, if savers’ balances continue to decrease year on year it would represent a worrying trend for household finances.”