Savings balances reduced as consumers dip into reserves, research shows

The average savings balance over £1,000 has fallen significantly in the first quarter of 2015, compared to the fourth quarter of 2014, according to the Halifax Savings Review. 

While consumers managed an average of £17,945 in Q4 2014, that had dropped by over £1,000 in Q1 2015 to £16,690. 

The fact that one-quarter of savers have been forced to dip into their reserves could explain the fall in cash. 

Post-Christmas savings boost didn't materialise 

There's no doubt Christmas is expensive and it is therefore typically a time when households are forced to access their savings to foot the bill for the festivities; however the index suggests there has been no upsurge since then. 

Savings balances are lower than they were in January 2015, which is unexpected given the deadline for depositing cash into tax-free ISAs is April. It is worth noting that from 6th April 2015, those lucky enough to have the funds can put up to £15,240 into an ISA. 

According to the figures, consumers who were dipping into their savings were taking out £1,087, on average. The review shows that men are not as good with their money as women, as they took out £1,290 compared to just £909 for female savers. 

Savings splurge suggest bad planning 

The most common reason for dipping into reserves was to pay for a holiday or weekend break, with 22 per cent of respondents citing this as their reason for splashing the cash.  

Some 16 per cent said the money was used for emergency home or car repairs, while 14 per cent said they had been overspending on their current account. Unexpected utility bills were cited by 12 per cent and 11 per cent raided funds to pay off debts. 

Gas and electric bills should not come as an unexpected expense, particularly with fixed-rate deals available on the market, and repairs on a home or car should be factored into the overall cost of ownership. Likewise, overspending on a current account suggests people are failing to budget effectively. 

Head of savings at Halifax Giles Martin said the figures indicate consumers are not prioritising saving. 

"Whilst consumer confidence may have improved, with higher employment levels and low inflation, it remains important that a good savings habit is encouraged and regular saving remains a central part of a household's financial planning," he said. 

Research highlights financial regrets

As people get older they often reflect on decisions they made earlier in life, and new research suggests many regret choices they made about their finances.

Financial solutions provider Partnership questioned 40 to 70 year olds and found that more than one-third (36 per cent) regretted not saving enough, while 25 per cent said they wished they had saved into a pension.

Meanwhile, 13 per cent admitted getting divorced had been an expensive regret and 12 per cent said that pouring money into badly performing investments was regrettable. Some eight per cent suggested it was a mistake that they hadn't bought a house sooner.

The study proves that while it may be difficult to put money aside, those who haven't come to regret it later in life. Paying off debt should be a top priority for anyone looking to get their finances in order, but once this is under control it makes sense for consumers to think about putting a percentage of their disposable income into savings.