People forced to cut back on savings

The increased cost of living combined with a stagnant growth in wages has left many individuals struggling to make ends meet.

For this reason, nearly a third of people will be forced to cut back on their savings in the coming months, with some choosing to stop putting money aside completely, according to new research from Lloyds TSB.

Around 30 per cent of savers who took part in the survey said they would reduce the amount they save or stop entirely over the next 12 months as they have no spare cash in order to do so.

Two-fifths of people revealed they have no money left at the end of the month to put into savings accounts.

Perhaps unsurprisingly, some 84 per cent of people surveyed said they would prioritise paying off debt over saving money, which may be wise considering it is easy to rack up more debt with the interest it accrues.

Worryingly, more than one in ten are dipping into their current savings to pay off debt, while one in five do so to avoid going overdrawn.

Nine out of ten people consider it important to put money aside to cover unexpected costs but are unfortunately unable to do so.

The low interest rate is certainly a factor in people's saving behaviour, with two-fifths of people surveyed claiming it is not worth saving in the current climate as there is no reward for it.

Interest rates on easy access accounts have dropped by an average of 68 per cent over the last two years and only 32 out of the 378 easy access accounts pay any sort of bonus initiative to savers. In comparison 101 out of 523 accounts offered rewards just two years ago.

The Funding for Lending scheme launched by the government has also seen savers lose out as interest rates have been affected. The initiative was put in place to boost lending to individuals and businesses by offering cheaper finance. However, this has led to banks becoming less reliant on attracting savers.

By James Francis

Find out more about money management on the ClearDebt blog.