A new report reveals UK households are stashing more in savings accounts than ever before, in part thanks to the looming threat of a double-dip recession.
The study, by Halifax bank, covers a full 50 years and examines the changing face of the savings market. Analysis starts at the end of the 1950s and goes on to examine the impact of social trends on saving over the second half of the century.
Key findings include a sharp increase in the overall value of savings and investments held, which has more than quadrupled in real terms since 1959. The report also identifies a significant shift in the types of savings accounts chosen by UK consumers.
However, it also reveals the considerable variations in the value of households’ savings, showing that a large proportion of people now have few savings, or none at all.
The best savings account rates in history
Back in 1959 most people held their savings in ‘savers clubs’, such as Christmas clubs, according to Halifax – even though no interest was paid on the money deposited. Today, the majority of savings are held in accounts with banks, building societies and National Savings & Investments, so consumers expect to earn reasonable rates of interest on their cash.
Halifax’s analysis shows the best decade for earning interest on your savings was the 1980s, with real returns (after inflation) averaging 2.75%. By contrast, the average savings rate in the 1970s was negative (-3.30%) thanks to the effect of rising prices.
Currently, many savers are earning interest at rates as low as 0.1% on their money – and with CPI inflation at 3.4%, the value of the cash held in these low-paying accounts is declining in real terms.
Too few consumers regularly review the returns they earn on their savings, so find out whether you could get more from your money by choosing a Which? Best Rate savings account.
Improving savings habits
Households saved an average of 7.1% of their after-tax income between 1959 and 2009, according to the Halifax report, with the savings ratio hitting a low of 4.3% in the 2000s. However, the bank says it expects the country’s heightened focus on financial security to drive a rise in the proportion of income saved by households in the short term.
If you’re struggling to find enough spare cash to put by each month, check out our How to save guide. It features tips for cutting your household bills and advice on how to squeeze more out of your monthly budget.
According to Halifax, (individual savings accounts) have risen rapidly in popularity since they were first introduced in 1999. There were 14.2million in use in the tax year 2008/09.
Opening a cash Isa is a great way to kick-start your savings habit, as you’ll be able to deposit up to £5,100 a year tax free. You can read more about how they work in our advice guide and compare cash Isas, as well as standard savings accounts, by visiting our independent reviews.
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