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Brits' savings strategies put lockdown cash piles at risk

Brits' savings strategies put lockdown cash piles at risk

  • The pandemic has improved Brits' savings habits, with a third (33%) of women and a quarter (24%) of men set to prioritise their savings
  • Reduced spending on socialising, commuting and holidays has helped boost average monthly savings to £276, up from £240 pre-pandemic
  • However, a reliance on standard savings accounts - where interest rates are typically lower than inflation - means savers are at risk of seeing the value of their money fall in real-terms over time.

Covid-19 has prompted Brits to save more and improve their savings habits, but many risk losing out long-term by relying on savings accounts over investments.

New research by financial services mutual Wesleyan found that a third (33%) of women and a quarter (24%) of men now plan to prioritise their savings following the pandemic. A fifth of UK adults (21%) said they hadn't properly focused on their savings before Covid-19.

But many of those gains will be lost as it emerged that cash savings accounts, where interest is typically lower than the rate of inflation, are Brits' most popular savings option (55%). As a result, many people's hard-earned funds will gradually be worth less and less over time.

Wesleyan's research found that savers have pocketed an average of £35 a month more during the pandemic, with average monthly savings increasing from £240.23 before the pandemic to £276 a month since.
When asked what has helped them save cash, Brits pointed to reduced spending on socialising (60%), travel, including commuting (53%), and holidays (48%).

Those aged 35-44 have saved the most during lockdown, putting aside an average of £296.83 a month. But it's been the very youngest savers that have seen the largest average increase in their savings rate, with 18-24s now pocketing an average extra £57.88 a month, compared with just £11.52 for those aged 25-34.

However, only 14% of Brits are investing in stocks and shares - where the real-term value of their savings has the greatest chance of increasing ahead of inflation, which currently sits at 0.7%*. Women (10%) were less likely to be investing than men (17%).

Nathan Wallis, Chief of Staff at Wesleyan, said:

"It is clear the pandemic has prompted many people to re-think their approach to savings. However, along with looking at how much they can put away, it's also essential they consider where they are putting their money.

"Of course, it is important to have some savings that you can access easily for day-to-day or emergency use. But in an environment where interest rates are well-below inflation, simply storing cash in a savings account could risk the value of it shrinking over time."

Just under one in six (15%) UK adults who don't currently invest in equities say the pandemic has made them want to find out more about investing.

Younger generations show the greatest interest, with almost a third (30%) of 18-24s and a fifth (20%) of 25 to 34-year-olds now keen to exploring equity investing, falling to 14% for 45-54s.

Nathan continued: "Anyone who has funds they can tie up for a longer period and is willing to take some risk with their savings should consider investing in stocks and shares. There is the potential to grow your money, outpace inflation and provide new income streams.

"Savers could also consider tax-free investments such as stocks & shares ISAs, which would enable them to get even more from their hard-earned funds."

*CPI annual rate

Wesleyan's research is based on a survey of 2,000 UK adults, conducted by OnePoll between the 15-19th of February 2021.

Note: There is no such thing as a totally risk-free investment, and it's important to remember that the value of your investments can go down as well as up, especially when invested in stock markets, which can be volatile. This means that you could get back less than you invest.

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'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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