Britons save just 4% of pay
THE average Briton now saves just 4% of their annual income, according to a worrying new study.
Over the last quarter, the average person managed to put away around £254 each, equivalent to just £84 a month, figures reveal. Even more disturbingly, nearly 50% saved nothing at all in the last three months.
Men are more financially prudent than women, saving an average of £376.86 in the three months to the end of June 2004 – or £125.62 a month. In contrast women saved an average of £136.60 over the quarter, or just £45 a month.
Older people are more likely to save their pennies. Those in their fifties saved the most over the last three months, averaging £609.39 or £203 a month. People in their thirties saved an average of £194.68, or £64.89, while teenagers saved on average £105.26 or £35 a month over the same period.
The research by financial provider Birmingham Midshires will add to growing fears of a looming savings crisis. Official figures show that while we have historically saved around £8 from every £100 of take-home pay, this has dropped to close to half of that - nearer £4 out of every £100.
There is also widespread concern over the huge increase in consumer spending. Last month the Bank of England confirmed consumer debt had passed the £1 trillion mark for the first time ever.
Interest rates have also gone up five times in the last nine months to a current rate of 4.75%. This has pushed up the cost of borrowing, adding to the pressure on many consumers, in particular homeowners.
Yet the steady increase in the base rate is good news for savers, with rates on a wide range of accounts becoming increasingly attractive.
Following the base rate rise earlier this month, Intelligent Finance increased the rate on its cash mini Isa to 5.1%, while Abbey‘s monthly saver account will now pay 5%.
Other high interest savings accounts include the ING Direct account which has a current rate of 5%. AA‘s telephone-based savings account now pays interest of 5.36% but this includes an introductory bonus of 0.7% for the first 12 months.
Tim Hague of Birmingham Midshires said it was important people made the most of their money by saving more and borrowing less.
'We do not know how high the Bank of England will raise rates over the next year. I would urge people to get into the habit of curbing their spending and saving money now,' he said.
'Research shows that despite interest rate rises in recent months, people are still failing to increase their savings levels to take advantage. As borrowing becomes more expensive, people should take stock of economic changes and reign in their spending so as to avoid paying the price for debt,' he added.
