Savings dip as household finances squeezed

by Gill Montia

Story link: Savings dip as household finances squeezed

The effects of higher interest rates and household bills are evident in a new survey by Investec, the private bank that prides itself on its traditional approach to banking services.

According to the bank’s savings monitor, Britons have been able to put aside less of their income during the past six months.

While the proportion who managed to save remained unchanged from July 2007, at 41%, the average amount being saved dropped from £284 per month to just £233.

Linda McBain, head of banking at Investec comments: “It appears people are saving less each month as they tighten their belts.”

The study has also revealed an alarming level of ignorance about interest rates, with just one-third of those questioned aware of the rate they are receiving. Of this proportion, only 18% could state the exact rate.

Last month National Savings and Investment (NS&I) reported that the amount put aside by UK savers has risen from £1.1 billion in 1957 (in 2008 values) to £43.9 billion in 2007.

In its report NS&I attributed the increase to rising affluence and an increasingly sophisticated approach to savings.

It predicts the proportion of income set aside will grow further, with the so-called “savings ratio” increasing from the 5% level seen in 2006 to 7.5% over the long-term. In 1957 the ratio was 1.5%.