Britons ‘starting to catch the savings bug’

Households are starting to appreciate the need to save money every month.

Research by MoneySupermarket.com has found that 42 per cent of working fa…

Households are starting to appreciate the need to save money every month.

Research by MoneySupermarket.com has found that 42 per cent of working families are putting cash aside in an effort to build up a financial buffer and this figure rises marginally (43 per cent) for retirees.

The study also discovered that people using a cash ISA have saved or are planning to save on average £3,248 in the 2012-13 financial year. Encouragingly, some 28 per cent of these individuals are looking to use their full cash ISA allowance of £5,640.

Getting into the savings habit

However, it is not just people with children who are catching the savings bug, as 38 per cent of young professionals are also saving money, perhaps so they can eventually get on to the housing ladder.

In families where there is only one parent in employment, 21 per cent have been able to set cash aside and this points to the fact that not every UK adult is able to build up a rainy day fund because of the circumstances they are faced with. 

Kevin Mountford, head of banking at MoneySupermarket.com, said: "It is encouraging to see so many people taking advantage of the tax-free benefits of saving into an ISA. Unsurprisingly, it is those who are retired who are putting the most away, but it is encouraging to see so many young professionals getting into the savings habit.

"While not everyone can afford to put away the maximum tax free allowance of £5,640, taxpayers should try to use as much of their ISA allowance as they can to make sure that the interest they earn on their hard-earned savings is not unnecessarily lost to taxation."

He added consumers should do their homework and look around for the best rates if they are setting up a savings account. With the cost of living expected to rise throughout 2013, UK adults should do their utmost to set some money aside.

Make a budget and stick to it

If people are not sensible with their money in terms of organising a budget, they could face financial difficulties further down the line. In a worst case scenario, they may even need debt help to bring their situation under control.

Over the past five years, 45 per cent of individuals who opened a cash ISA made a withdrawal. The most common reason for taking money out was to meet the cost of household bills (26 per cent), followed by paying for a holiday (22 per cent) and covering the expense of a big purchase such as a car (18 per cent).

However, if these people did not have this financial buffer to fall back on, they could find themselves struggling to make ends meet at the end of the month.

It follows on from HSBC's Annual Savings Report, which found that women took a serious approach to saving in 2012. Ladies increased their pots by an average of £1,775 over the course of the year, while men only set £969 aside.

By Joe White

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