Do You Have Enough Savings for Emergencies?
One thing the virus pandemic has brought home is how ill-prepared many of us are for sudden emergencies that impact on our finances.
In a short space of time many people have been thrown out of work and/or seen their income plummet, due in part to the virus but also to the measures taken to control it.
Obviously in future there will be enquiries to determine what things government did well and what they did badly, and what lessons need to be learned. But for all of us it has been a wake-up call on how quickly things can change, and the importance of being prepared for a sudden, unexpected hit on your finances.
Of course, that need not mean another pandemic. It could just as well be an accident or illness, losing your job, or a sudden change in your domestic circumstances.
In general financial experts say you should aim to have at least three months’ worth of income in an easily accessible form to cover sudden emergencies. This will give you breathing space to respond and (hopefully) get your finances back on an even keel. The reality is, however, that many of us are not fortunate (or prudent) enough to be in this position.
A survey of 2,000 UK adults by OnePoll commissioned by online banking website Raisin produced some eye-opening results…
Table of Contents
Survey Findings
The key findings of the Raisin survey are summarized below:
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The average savings amount of a person in the UK is £9,633.30.
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Men have almost double (£13,140.61) the average savings of women (£6,869.84).
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The lowest average savings in the UK are found in the East Midlands (£6,438.48) followed closely by Northern Ireland (£6,710.00).
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Londoners have by far the highest average savings with £28,978.40. This is more than double the second-placed West Midlands (£13,318.35).
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Almost 1 in 5 of those aged 55 or over (approaching or at retirement age) has just £1000 or less in savings.
When asked ‘How much, to the nearest pound, do you have in your savings account(s) today?’ 848 of the 2,000 respondents declined to answer the question. Of the 1,152 people who did, replies were as follows:
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6.5% said they have no savings whatsoever.
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26% said they had less than £1,000 saved.
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Using the Trimmean mean, taking the middle 66% of responses to give a realistic figure excluding outliers, the average savings of a person in the UK is £9,633.30.
Regional Variations
- Those living in London have more than four times the savings of those living in the East Midlands.
- The lowest average savings in the UK are found in the East Midlands (£6,438.48) followed closely by Northern Ireland (£6,710.00)
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London has the highest average savings by far with £28,978.40. This is more than double second placed West Midlands (£13,318.35)
Age Variations
The survey found that in general, as you might expect, those in older age groups tend to have more savings:
|
Average Savings |
% With £0 in Savings |
% With £100 or Less in Savings |
% With £1000 or Less in Savings |
|
|
18 to 24 |
£2,481.16 |
10.83% |
27.50% |
50.83% |
|
25 to 34 |
£3,544.16 |
12.38% |
21.78% |
42.08% |
|
35 to 44 |
£5,995.92 |
7.91% |
12.99% |
33.33% |
|
45 – 54 |
£11,013.99 |
6.34% |
11.22% |
25.85% |
|
55 and Over |
£20,028.60 |
2.23% |
7.59% |
18.08% |
It’s not all good news for older people, though. Almost 1 in 5 of people aged 55 or above in the survey had less than £1,000 of savings.
The average savings among over-50s are admittedly almost double those of the 45s to 54s (and more than double the national average). But £20,028.60 – the average savings of someone over 55 in the UK – is still less than the national average salary of a full-time employee (£28,677 according to the most recent Government data).
It’s important to note that these findings don’t take into account other assets (such as properties or businesses) people may own. They do, however, represent a large cohort of people who are approaching retirement age and don’t have any significant savings to cushion them from financial turbulence.
My Thoughts
Overall, the Raisin survey indicates that many of us are ill-prepared for any crisis that may affect our finances.
Older people in general are slightly better off, but there are still large numbers heading towards retirement with almost nothing in reserve. That is especially alarming for those who – for reasons such as ill-health or caring responsibilities – are unable to work and dependent on state benefits.
There are, of course, no easy answers. I do appreciate that many people have barely enough income to cover their day-to-day spending. And the appeal of putting money into a savings account has undoubtedly reduced in recent years due to the ultra-low interest rates on offer.
Nonetheless, I do still think it’s essential for everyone to have some accessible savings for emergencies. And the earlier you start saving – even if it’s only small amounts – the more time your money has to grow.
Personally I am currently keeping most of my ’emergency savings’ in a Santander 123 Lite account (as discussed in this recent blog post). This doesn’t pay interest, but you do get cashback on a range of household bills. Even with their £1 a month fee, I am earning around £50 a year tax-free (cashback minus fees) from this account, which in this low-interest-rate environment is at least something. Santander is protected by the Financial Services Compensation Scheme (FSCS) which protects savers with UK banks against losses of up to £85,000 if the bank fails. I am therefore confident that my cash will always be available quickly if I need it.
Another savings option that might suit some people is Raisin (who sponsored the survey mentioned above). They say their ‘free one-stop online savings solution has been designed to help you earn more money from your savings. With a range of partner banks offering FSCS-protected savings accounts with competitive rates in one place, we take the hassle out of finding the right savings account for you.’ On their website Raisin also say they plan to launch an easy access savings account of their own soon.
I hope you enjoyed reading this post and found it informative. I’d love to hear what you do about emergency savings and where (if you have any) you keep them. As always, any comments or questions can be posted below.
Disclaimer: I am not a professional financial adviser and nothing in this post should be construed as individual financial advice. You should always do your own ‘due diligence’ in financial matters, and seek advice from a qualified financial adviser if in any doubt how best to proceed.