British households are struggling to put enough money into savings accounts when compared to their European neighbours, a new study shows.
The UK has fallen to 11th in the Post Office’s Future of Savings Study, which looks at the saving habits of 18 countries where the cost of living is comparable.
It means the UK is now behind Spain and Italy as the average amount a household could potentially save on a yearly basis has dropped by more than 10% since 2010 to £3,781.
To put it into perspective, that figure is nearly £5,000 less than in Australia and £3,286 less than the highest placed European country – Switzerland.
The head of savings at the Post Office has even suggested that the figure for the UK could dip below £3,000 by 2018, putting it below many of Europe’s most advanced economies.
The importance of savings
Having savings in place can help households to cope with unexpected bills, providing a financial buffer for those that have budgeted effectively.
It also means they are less vulnerable should their circumstances change or if a change in economic conditions is noted.
Paying off debt rather than saving is preferable in the majority of instances as interest payments would likely cost more for a consumer when servicing debt than when they are trying to save.
A large amount of savings are also held in coin jars across the country, according to Gocompare, who estimate that £1.3bn of loose change is stored in this manner.
This finance fails to collect interest – even a low rate generates some additional value – so placing it in a suitable account would make financial sense.
Saving with prepaid options
A major aspect to attempting to save revolves around limiting existing spending – essentials such as food, drink and rent can add up but it’s possible to reduce non-essential spending.
One way of being careful not to overspend and helping to instill core budgeting values involves loading money onto a prepaid card – only the funds on that card can be spent, so any additional funds could then be protected in an alternative account.
Furthermore, as a credit facility does not exist, it is impossible to rack up debt using a prepaid card so users can budget and save while remaining confident in what funds they have available.
Cards are also not linked directly to bank accounts, so the threat of fraud is reduced considerably and chip and PIN security is also available on some cards for added protection.