Saving money is something that many people have not been able to do in the years since the recession, and the low rates offered by the banks have not helped those who actually do want to save. Interest rates fell to as little as 0.1% in many places, so putting money away may have seemed particularly pointless, especially seeing as the rate of inflation was much higher than this. This meant that, by putting money away then, your cash would actually be losing value over time. Rates have picked up a little since then, but they’re still painfully low, even on ISA accounts (where rates have typically been some of the highest in the past).
Those who are saving are not typically doing it for the returns, because decent ones just aren’t there at the moment. Savers are saving mostly out of habit or because they simply would like to have some money put away for some reason. Many have savings goals which they’re working towards, as some things take more than one payslip to pay for. For these people, the fact that money isn’t growing as fast as inflation isn’t too much of a problem, as they plan to use it sooner rather than later.
Zopa (the peer to peer lender which uses savings to fund loans and therefore gives a higher rate of interest than the banks) has conducted a survey to see what people are saving for. The clear winner with 36% was holidays, whereas just 8% of people were saving for a deposit on a house. This goes to show how attitudes to what’s important are changing – for some, a holiday is the only rest they’ll get from worrying about their cash all year. Many people are still working for lower wages than they should after wage cuts and freezes. Others have been stung by the rising cost of living, and so taking a holiday could well be essential to maintain mental and physical health. Housing is very expensive at the moment, so those without a mortgage could be put off saving for a house deposit. For some, the property crash is still too raw a memory, so there could be wariness surrounding committing to a mortgage. The low number of people saving for a house deposit may also be due to the government’s Help To Buy Scheme, which means you may only need a 5% deposit for a home.
Coming in second place is the classic ‘saving for a rainy day’ with 32%, with emergency funds taking third place with 31%. Retirement came a respectable fourth with 26% before children (14%), a new car (12%) and grandchildren (9%). Other things saved for included buying a property outright (13%) and savings for home or car repairs which need doing in the near future (11%). Having a goal when saving is important, and it’s been shown that if you know what you’re striving for then you’re more likely to stick to your guns and save properly.