A fifth of Britons admit to having no savings whatsoever while only just over a third of adults say they have less than £500 put aside for a rainy day, new research reveals today.
The figures from market research consultancy Mintel also show that women are least likely to have that all important nest egg. About 17% men, nearly a quarter (22%) of women and as many as 22% families admit to having no savings at all..
The findings paint a grim picture of millions of households unprotected by even the smallest of financial cushions as they struggle to cope with the everyday cost of living in tough economic conditions. Rising fuel prices and a hike in VAT have made the beginning of 2011 difficult. Increase in inflation is further bad news for savers finding the value of their deposits falling in real terms. The rise in the Consumer Prices Index to 4% in January from 3.7% in December means a basic rate taxpayer now needs to find an account paying at least 5%, just to stop the value of their savings eroding in value.
Toby Clark, head of finance at Mintel, said: “With unemployment continuing to rise and concerns about the health of the economy, those without a safety net could find they are financially exposed in the coming months. The accepted wisdom is that low interest rates are stopping people from saving, however we have found that it is only really an issue for the top end of the market and the reality is that meeting everyday costs and expenses is by far the largest savings barrier.”
When asked how they would generally describe their current financial situation, almost three in 10 consumers (28%) describe their conditions as tight, only just making ends meet. A further one in ten (8%) say they are really struggling, admitting they are in real danger of falling behind with bills or loan repayments. But those in the worst situation are the 4% of Britons who are in real trouble having missed loan repayments or household bills.
The largest proportion (42%) are those who feel that their financial situation is stable, but there is not a lot of money left by the time the basics are taken care of. Just 18% admit to being in a healthy financial position with money left at the end of the month for a few luxuries or to add to their savings.
The strains that the slowdown has put on the nation are showing. Over the past year, half (50%) of consumers have withdrawn from their savings, with lower income groups among the most likely to have taken funds from their savings. Around the same number (53%) admit that they can’t really save or invest at the moment.
For those who are lucky enough to have spare cash, saving rates highly on consumers intentions. When asked what consumers choose to spend extra money on, the top five spending priorities are dining out (35%), savings account/emergency/rainy day fund (33%), going out (pub, cinema etc) (33%), small extras for family members (26%) and books, DVDs and CDs (25%).
However, with savings being eroded by the effects of inflation and taxation, there is little incentive for people to save now. According to Andrew Hagger of Moneynet.co.uk, basic rate taxpayers now need to earn 5% gross on their savings to maintain their spending power – a rate unobtainable on any standard savings account at the moment.