Finance: Expert on impact of inflation on savings accounts
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Saving money has been a challenge for many people due to the strains of the COVID-19 pandemic. However, for others, remaining at home has meant cutting down on expenditure which can go towards their savings. Despite a bumper stay-at-home savings boost, though, many are falling short of what they need to feel financially secure.
A recent report undertaken by Yorkshire Building Society in partnership with the Centre for Economics and Business Research (Cebr) has showed the extent of the issue.
The ‘Nation’s Nest Egg’ report illustrated consumers are currently facing a savings shortfall of a staggering £371billion.
It found UK adults require a nest egg of some £17,465 in order to feel financially secure.
This means the average Briton requires an additional £7,220 in order to reach this goal.
Savings warning: Britons face £7,000 ‘shortfall’ – act to secure ‘financial security’ (Image: Getty)
Although there is a way to go financially before Britons’ hopes are met, attitudes towards saving appear to be improving.
Financial resilience was found to improve, rising to 57 out of 100, up from 44 in 2019.
In order to increase financial resilience, most people would like more money in cash savings.
However, this was closely followed by reducing debt or choosing to own a property.
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Tina Hughes, director of savings at Yorkshire Building Society, commented on the matter.
She said: “Despite many people managing to put away more money during the past 18 months, this latest research proves just how fragile people’s savings are, and how far away they are from reaching a state where they feel they have sufficient reserves to be financially secure.
“Whilst some people were able to save throughout the pandemic, that hasn’t been the case for everyone, with many now more exposed than before to financial shocks.
“As a society we know how difficult it is for people up and down the country to save towards their nest egg, and we are committed to helping more individuals build their financial resilience.
“Money worries can have a detrimental impact on people’s wellbeing and so we are here to help them in times of need.”
Savings warning: There are a number of ways to save (Image: EXPRESS)
Ms Hughes added it was positive to observe that overall the UK’s financial resilience has improved.
It is hoped that as Britain emerges from the pandemic that good money habits will continue for those who have been able to save in this challenging time.
However, for those who have not, making a start on a savings journey is likely to be key.
Learning lessons from this unprecedented time could significantly help individuals in savings progress in the long run.
Generally, Britons are encouraged to put aside three to six months’ worth of savings for emergencies.
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This provides an important financial buffer, and safety net, should the worst happen.
Other than this, though, with interest rates at staggering lows recently, individuals are encouraged to consider other options.
Some may wish to look at investing, although should always be aware there are risks involved with this kind of action.
While there is a potential for good returns, people should note they could end up with less than they originally put in.
Other than that, ISAs are often considered good ways of saving due to their tax-free nature.
Individuals will be able to put up to £20,000 a year into an ISA if they feel this option is well-suited to them.