Thursday, February 17, 2011, 13:08
Nearly 20% of Britons have no savings whatsoever according to a study carried out by the market research consultancy Mintel.
The research also found that a further 35% of the population have less than £500 put aside for emergencies.
Women are least likely to have any savings stashed away with 22% confessing to having absolutely nothing put by for a rainy day. Men fare little better with 17% admitting to having no savings at all.
The figures make worrying reading at a time when attention has been focused on the likelihood of the economic situation worsening over the coming months and the importance of establishing a financial cushion. Families with little or nothing to fall back on could face serious problems as unemployment and prices continue to rise and wages fail to keep pace with inflation.
The report comes just days after news that the Consumer Prices Index rose to 4% between December and January and that unemployment rose again in the final quarter of last year.
Toby Clark, Head of Finance at Mintel, said: ”With unemployment continuing to rise and concerns about the health of the economy continuing, those without a safety net could find they are financially exposed in the coming months. The accepted wisdom is that low interest rates are stopping people from saving, however we have found that it is only really an issue for the top end of the market and the reality is that meeting everyday costs and expenses is by far the largest savings barrier.”
Some 40% of respondents said they felt their financial situation had worsened throughout 2010 compared to 20% who said they had seen an improvement. Around 21% of those questioned said they were put of saving by low interest rates while 19% said they used any disposable income to pay down debt.
The current rate of inflation means that a basic rate tax payer would need to deposit any savings in an account paying a return of at least 5% to stop the value of their nest egg depreciating. Mervyn King, the governor of the Bank of England said yesterday it is likely inflation will peak at 5% later in the year and might not fall back to the bank’s 2% target until 2012.
Andrew Hagger of Moneynet.co.uk told the Guardian “”There are no traditional types of savings accounts out there paying enough to keep pace with inflation. There are Isas paying a net 4%, but the majority of the 20 cash Isa accounts offering a rate of 4% or more require you to tie your funds up for between four and five years.”
The study found that the economic slowdown is forcing people to draw down any savings they do have to meet rising costs. Some 50% of consumers said they had made a withdrawal from savings accounts over the past year, with lower income groups among the most likely to do so.
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