How much do you put away in cash each month? A few pounds? More? Nothing at all? If you don’t save anything, or at least not much, you’re far from alone. The household saving ratio is the amount we have left to save from the disposable income we have available each month. Recent figures reveal it has dropped to 1.7% - the most recent statistic available for the first quarter of this year. That is far lower than it was just three months earlier, when 3.3% was recorded.
This isn’t good news for Brits, but it is perhaps not surprising, either. Saving money is often the last thing most people can achieve each month. Rising bills, increases in the prices of goods and services, and stalled incomes all combine to make saving an afterthought in many cases.
The overall trend has been down for years
Back in 1996, the household saving ratio was a frankly-impressive 14%. Since then, we’ve seen peaks and troughs, but the ratio went up again until 2009 – the point at which the recession kicked in. It’s hardly surprising lots of people have struggled to save since then. However, the drop from the end of last year to the beginning of this year was sharp, and it makes us wonder where things are heading next.
Is saving that important?
We should all have a financial cushion available in case we need it. But saving to create that cushion is harder than many of us would like. Most experts agree we should have the equivalent of three months’ wages set aside in an easy-access account in case we ever need it. The idea is, if you lost your job, we’d be financially fine for three months – during which time we would hopefully find another source of income and work.
Of course, it will take time to save up that amount of money, and with today’s incomes squeezed more than ever, it is hardly surprising lots of people are struggling. There’s also the issue of super-low interest rates. Savers aren’t getting much of a return on their cash, which could be among the reasons why people aren’t bothering to save anything at all.
But we’d always recommend people save something, even if it isn’t a lot. Having that cushion to rely on if you ever need it – and let’s face it, life can throw up surprises occasionally – is something that could be life-changing. It could make things a lot easier if you do suddenly find you need some cash.
Managing your finances is just as important for the long term as it is on a day-to-day basis. We’re not all great at doing it, but even though there may be little incentive to try and save, it may still be the best thing to do. Even a little is better than nothing, if you can. There may come a day when you will be glad you took the time to pop some cash into a savings account.