About 16.8 million working-age people in the UK - that’s four in ten (40%) of us - have less than £100 in savings.
The research published by the Money Advice Service (MAS), also shows that more than seven in ten (71%) have experienced at least one unforeseen expense a year - with the most common being car issues (with a mean cost of £1,341) and the most expensive being lending to family and friends (with a mean cost of £2,482 a year).
Geographically, Northern Ireland, the West Midlands, and Yorkshire and The Humber have the least amount saved (see the map below, click to enlarge)
Source: Money Advice Service
But the worry is that if you’ve no financial safety cushion and one of these unforeseen expenses does occur, the only options tend to be credit cards, loans, and said borrowing from family and friends, which isn’t a sustainable solution.
However, the report does have some heartening news, too - the research goes on to show that 23% of working-age people who earn less than £13,500 have more than £1,000 in savings, with 40% putting money away regularly.
‘Developing a savings habit is achievable’
Nick Hill, money expert at MAS, says: “Everyone’s situations and abilities are different, so it’s important to find an approach to saving that’s right for them and their household. For some on low incomes, saving is a real challenge as they may simply lack the income needed to save at all.
“But for many, developing a savings habit is very achievable. Regular saving is key to building up that buffer against those life surprises. If you earn enough to set even a little aside each month that’s great - a direct debit into a savings account might be an easy way to do this, even if you start small and increase the amount with time.”
This theory is supported by MAS case study, Zayde, who took part in the MAS savings challenge, and managed to save £600 in three months. She says: “Even if you think you don’t have enough money to save, you really can do it! We reached our savings goal by cutting back on spending. Rather than giving kids money for lunch, we prepared packed lunches for them and when we went shopping, rather than picking stuff up randomly we made shopping lists and really considered whether we needed them. I put the money I saved into a separate bank account so I could see it accumulating.”
Nearly seven in ten (66%) Moneywise.co.uk users take the money saving option of bringing a packed lunch into work each day. For further inspiration, read our blog about the benefits of making a packed lunch vs eating out at lunchtime.
With the Personal Savings Allowance, basic-rate taxpayers can earn up to £1,000 a year in a savings account without having to pay any income tax on it – this falls to £500 for higher-rate taxpayers (additional rate tax payers don’t get a personal savings allowance).