Saving money is an important aspect of financial stability and security, yet many people in the UK are struggling to set aside funds for their future. A study by the Money Advice Service shows that over 16 million people in the UK have less than £100 in savings. This highlights the urgency of the savings crisis in the country and the need for individuals to prioritise saving and for the government to take action to help them.
However, while this current cost of living crisis is affecting people of all ages, young people seem to be struggling the most. According to a recent YouGov survey commissioned by wealth manager True Potential, one out of every four people aged 25 to 49 are not saving anything and do not have any emergency savings. In contrast, only half as many people over 65 are struggling to save.
These figures indicate that the younger generation is experiencing a savings crisis that could end up impacting them as they age. With no savings, young people will struggle to put together a housing deposit, or even to afford a comfortable retirement when the time comes.
More urgently, it means that young people may not have money to tackle emergencies such as car repairs, boiler repairs, hospital bills or vet fees. This could end in them taking out high-cost short-term loans and potentially exposing themselves to a cycle of debt.
The soaring cost of living is causing two in five people to reduce the amount they save each month in an attempt to repay their debts. Among those who do save, one in five are putting aside less than £50 per month. This is an alarmingly low amount and suggests that many people are not prepared for unexpected expenses or emergencies.
Retirees are finding it much easier to save than people of working age. According to the Money Advice Service survey, one in ten people between the ages of 25 and 49 have money in Premium Bonds, while a third of pensioners have invested in them. This highlights the stark difference in savings habits between the two groups.
Daniel Harrison, chief executive of True Potential, is calling on the government to take action to help younger generations set aside money for the future. One proposal is to scale up pension auto-enrolment, which currently requires private sector employees to contribute a minimum of five percent of their earnings into their workplace pension, with employers contributing at least three percent.
The total minimum contribution is currently set at eight percent. Harrison suggests gradually increasing the auto-enrolment rate to 12 percent and introducing a new auto-saving scheme that could be increased to an additional eight percent over the next decade.
The goal of these proposals is to get the overall savings rate in the UK more in line with other developed nations. Without action, the savings crisis among younger people could have serious consequences for their financial security in the future. It is important for individuals to prioritise saving and to take advantage of any savings opportunities available to them, such as workplace pensions and automatic savings schemes.
