One in Six UK Adults Have No Savings

Millions of UK residents are finding it hard to even save £100. The rising inflation rate, soaring interest rate, unemployment, and many other factors are the main contributors.

Let's discuss the current level of savings for UK adults and the possible consequences for consumers.

Key Findings from a Recent MaPS Research Report

The Money and Pensions Service (MaPS) UK conducted a research survey to assess the level of savings of UK residents.

Here are some key findings from the research:

• 26% of UK adults have up to £100 of savings (some have £0).
• Around 50% of respondents are worried about their outstanding debts.
• 33% of them are anxious about the number of credit products.
• A staggering 80% of people still feel uncomfortable talking about their money problems.

Almost nine million people (17%) in the UK have zero savings at the moment. Another 5 million (9%) have savings of up to £100 only.

It means over a quarter of UK residents have nothing to spend in case of an emergency without relying on a credit instrument.

43% of people having some sort of debt instrument are now anxious about it. One-third of people having borrowed money are worried about the number of credit products.

However, the most astonishing finding from the report suggests that almost 80% of people still find it hard to talk about their money problems.

Many people find an excuse for not talking about money problems like being shy, having the fear of being judged, or not wanting to create fear among others.

How the Rising Cost of Living is Affecting the Savings of UK Residents?

One of the main reasons for the recent results directly relates to the rising costs of living in the UK. People are still finding it hard to recover from the Covdi-19 crisis.

The consumer price index (CPI) remained at 10.1% in January 2023. It means the purchasing power of consumers still remains low.

With the same level of income, people lose more money with soaring levels of inflation. Even the inflation-adjusted income streams barely keep up with household needs.

The Bank of England has increased its benchmark interest rate to 4.0% in a continuous effort to curb inflation.

It means borrowers have to pay more interest on their credit purchases. It again leads them to less purchasing power and no savings.

What are the Consequences of Not Saving Enough?

In the short term, consumers find it hard to cope with emergencies. However, if you fail to save for a prolonged period, the consequences can be harmful in the long term too.

Increased Level of Borrowings

"Most consumers turn to increased borrowing when they don't save money," explains Michael Needham, the founder of price comparison site, Doddler. "It means you'll pay more in interest payments in the long run."

"It may damage your credibility and put more pressure on your current level of income. You may find yourself in a debt cycle, as you switch from one credit instrument to another to fulfill your needs."

Less Purchasing Power

"When a significant portion of your income goes to interest payments, you have less purchasing power with no money left for you," she continues.

"Even with an adequate level of debt, you'll find it hard to pay for emergencies without savings. Also, you must save for planned financial expenses like mortgage down payments, retirement contributions, and so on."

Reduced Retirement Contributions

"Many people conveniently ignore the importance of starting retirement contributions early," says Matt Sullivan, founder of consumer finance startup, Harpsey.

"Many others find it hard to consistently contribute to their retirement plans."

"With increased costs of living and fewer savings, you'll find it harder to contribute and save for your retirement."

Reduced Investment Potential

"Ultimately, your investment potential will be reduced as you wouldn't find a way to invest without saving money first," he states.

"You may also have to put more money in your investment portfolio to adjust for inflation and save sufficient money in the long run."

How to Cope Up with the Inflation and Manage Savings?

With increasing costs of living, rising inflation, and soaring debts, it becomes even harder to save money.

As the MaPS experts suggest, you should talk more about your money problems to find solutions. It's better to talk about financial problems with your friends and family members.

Then, there are free credit advisory services. You should consult these professional services to find an optimal solution for your financial problems.

A starting point can be to create an emergency fund. It will help you fight emergencies without relying on external borrowings.

Then, create sinking funds for planned financial moves like a downpayment for your house mortgage.

Increasing financial literacy and seeking professional help can also guide you to create short and long-term financial plans.