Brits Focus on Debts at Expense of Savings
The increased cost of living is affecting people’s savings, new research shows.
Employment uncertainty and tax hikes are impacting Brits ability to save and causes many to focus on paying off short-term debts, ING Direct reveals.
The figures reveal Brits’ savings balances fell on average by 2.8 percent in the first three months of the year, fuelled by the current economic climate.
“As the cost of living increases, people are continuing to face a difficult balancing act and are sensibly continuing to pay down their short-term debt, albeit more slowly than last year,” said Richard Doe, ING Direct CEO.
“As usual, something has to give and it is people’s rainy day saving funds that have fallen.”
Average balances stand at £1,783, down £100 on the same quarter last year, showing these savings put aside for rainy-days have fallen by 12 percent in the last two years.
The number of savers using their hard earned savings to pay for everyday costs such as the cost of groceries and fuel has risen by one percent in the first quarter of the year.
“Wages aren’t keeping pace with the costs of living, which means that many households are running down their savings to pay for necessities,” commented James Knightley, ING Direct senior economist.
Unsecured borrowing fell by 4.6 percent also as Brits try to get their finances in order and out of debt in case of sudden unemployment. This trend continued from last year, but has slowed in the beginning of 2011.
One in six claims they are not confident they will keep their job due to the current economic pressures on businesses, seeing 18 percent use their savings to pay off short term debt.
Younger people and those on low incomes are particularly vulnerable, as the research shows their savings are being squeezed the most, partly because these groups have been hit disproportionately by unemployment.