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As incentives go, current interest rates don’t exactly have much in the way of motivation to offer. Even after years of putting cash aside you’re not likely to be able to grow your savings pot with a current Bank of England base rate of just 0.25%. Perhaps unsurprisingly then, the Office for National Statistics (ONS) recently revealed the savings ratio in the UK had fallen to a record low. The savings ratio is the proportion of disposable income in the UK that is channelled into savings. In May this year the ratio was down to 1.7%, from 3.3% in the previous quarter – so for each £100 of disposable income we are saving on average just £1.70. Millions of people have virtually no savings at all.
A number of reasons have been put forward to explain why Brits are no longer channelling money into their savings accounts. The first of these is that there is very little incentive to do so with savings rates so very low. The second is more unnerving – that there just isn’t the available cash to save. So are we all so strapped for cash that we can’t put anything aside for the future?
There’s no doubt that economic pressures, inflation and a mismatch between the average annual wage and factors such as house prices has resulted in budgets being seriously squeezed. But there are some very good reasons why, no matter how much income there is, saving is a really good idea.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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