Whether you fill holiday stockings or roast chestnuts around an open flame, lots of UK household look more closely at their savings in December. The main worry in many families is that they have little to no savings.
Around holidays, we usually assess our savings over the past year. This decides whether we can cover living expenses for a few months without going broke. Many households also want extras: a holiday in Spain or replacing the boiler.
With growing fuel costs affecting the prices of bare essentials more every year, putting money away seems more difficult. Is it, though? I’m going to look at the average savings UK households save, and those that the average person can pop into their savings account for that rainy day. Firstly, let’s look at why having savings makes sense.
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Why it is important to save
Savings are a buffer between unexpected costs and emergencies, and living stress-free. You’ll ensure that providing food and shelter for yourself and your family is never a pressing issue if you have a few months’ savings stashed away.
By saving money, you’ll be able to sidestep significant debt and buy the things you need and want. You’ll feel more financially independent and reduce the stress that only a lack of money brings.
A recent study revealed that a third of the UK’s population has less than £1,500 saved for their retirement years, while 20% have no savings whatsoever. Does this mean that many of us don’t consider savings important, or are we just in no position to save?
It’s estimated that putting away £1,000 every month is a fair figure, but almost nobody manages to do this. Is it through a lack of trying, or are we just not covering our expenses enough to do so? I guess the ability to save and the savings figure varies significantly, depending on the net financial wealth of every person attempting to save.
Saving means you can live life more on self-defined terms. It gives you more economic freedom, no matter the external economic conditions at the time. Before I get into the different average UK figures, let’s look at why you should attempt to save if you haven’t started already.
Profiting from interest
The sooner you save, the greater your chances of making a profit through interest. With time comes more interest. The more you have in your savings accounts for an extended period, the more the interest gained on that amount will compound. This enables you to really start profiting.
As interest rates climb, so does any money you have tucked away. Spending your money, or stashing it away in your mattress, means you’re missing a financial trick. You’re bypassing that magical feeling of watching your savings grow as the interest compounds on itself. As you age, your chances of building a proper nest egg get fewer, so take your opportunity now.
Growing your financial freedom
Saving is a way to ensure that you’ll be able to ride the financial lows that, let’s face it, can surface at any time in life. Not even the prediction great Nostradamus could predict everything, so how can we know what will happen tomorrow, next month, or next year? God forbid, everyone could experience health or job issues at any stage.
We must all look for ways to ensure we can cope if financial burdens are placed on us. Without savings in the bank, it’ll be much more difficult to cope when retirement age comes. Without a private pension, the more money you can draw from, the more comfortable your older years will become. Saving gives you more financial freedom.
Potential to invest or pursue a venture
There may come a time when you learn of an investment opportunity that you shouldn’t pass up. Or perhaps you’re tired of the day-to-day grind of formal employment and want to go it alone by founding a business. If you’ve got significant amounts saved, it makes both of these scenarios possibilities you can follow.
If you don’t have much saved in the bank, it may not make sense to risk your monthly income on new investments or ventures. What if they don’t work? Imagine the stress you’ll be under trying to make ends meet after putting funds you can’t afford into something new. Rent or mortgages need paying, and there’s less money to work with. More savings means less anxiety.
Even if you can put only a little away in a new savings account every month, it’ll grow over time, and you’ll be able to buy and try new things. Even if you’re getting on in years, it’s never too late to start saving, as every little bit helps, and it’ll be there when needed.
Average savings per UK household
According to an analysis conducted by Finder, the 2022 average for funds in savings accounts is £7,509. The UK median average household savings is £2,160 annually, which means 50% save more, and 50% save less annually than the figure. In 2020, the average British adult had £6,757 in savings, meaning that savings account balances have generally increased since then.
The average household savings is £5,403, showing a massive disparity between the rich and poor in the UK.
Low-income families, on average, have only managed to save £95 in 2022, with high-income families saving £6,978.
In reality, the gross average household savings in the UK is £76,301. This includes financial wealth like current and savings accounts, shares, trusts, ISAs, and bonds. Most UK households have saved less than this, though. At the same time, a tiny percentage of households with massive savings drastically increase the average.
As a result, I think it’s more realistic to look at the median amount saved (I’ll remind you that this means that 50% have less than the median and 50% have more). The median gross average household savings in the UK is £12,500, rising from £11,000 in 2020. A quarter of UK households have saved less than £2,100 in 2022, though.
The median monthly amount saved in the UK is about £180, and the average household savings per month is £450. Once again, this figure is more than the median figure as a small number of homes have very high savings rates.
The top 20% of UK households save an average of £1,817 every month, whereas the bottom 20% do not save anything. This lowest quintile theoretically would use £352 a month from their savings accounts if they had savings. The likelihood is that they don’t and instead live from day to day trying to get out of ongoing debt.
Averages aren’t as indicative as you’d think. A well-used example: place a single billionaire and one thousand needy people in a room. Then work out their average net financial wealth, and you’ll find that every one of the impoverished people would be a millionaire on average. It makes you realise how vast the disparity between the rich and poor actually is in Britain and the world over.
If you can save, take your chance and do it. You should try and save up three months of your monthly expense total to be in a position to feel comfortable and anxiety-free.
What should you try to save each month?
Financial experts suggest saving at least 20% of your net monthly salary.
Net monthly income budget guideline
The standard advice is to allocate 50% of your take-home pay to paying rent and buying food. You should spend another 30% on fun stuff like new clothes, the cinema, dining at a restaurant, or buying fast food. Finally, you should pop the last 20% into your savings account.
The above is a long-established budget guideline to help you control your finances better, but it isn’t that easy in practice. A lot depends on where and how you live and if you have an above average salary. In other words, are you spending more than 50% of your net income on rent and necessities? If so, you may be living above your means, making it more challenging to allocate 20% to monthly savings.
Nonetheless, experts will likely agree that saving a minimum of 20% of your monthly income is an excellent target to aim for.
The logic of dividing your monthly funds into these different areas is that you’ll better know where your money is getting spent. The cool aspect of the strategy is you still get to enjoy a night out or some extra spoiling every month. You’re managing your money better while still living in relative comfort.
UK household saving ratio
Although saving 20% is possible, it’s much more than the average UK household manages. So don’t feel too disappointed if you have to drop under the suggested figure.
The household saving ratio is worked out by calculating what a family saves in proportion to the net disposable income of the household. The UK’s household saving ratio has averaged 8.7% over the last decade.
In 2020, the household saving ratio shot up to 27.4% in the second quarter and 16.9% in the third quarter, but these are unrealistic percentages brought about by the COVID-19 lockdown periods. It would be best to consider how much you could save per month based on your personal and family circumstances.
UK average savings per age group
According to the Office of National Statistics data, people save more as they age. Older people often have higher bank balances. With this in mind, it could be helpful to know what people in your age bracket save proportionally.
According to 2020 statistics, the Baby Boomer generation had the highest average savings, with £9,758 saved per person. Second, according to statistics, was the Silent generation, with individual savings of £9,497.96. With an average of £2,530.71, Generation Z had the lowest savings – not surprising, as they’re the youngest generation.
Young people are less likely to have saved much as they’re just starting in the adult world. On average, they have lower salaries and can be deemed more reckless with their income. Add to this outstanding school debt, and this statistic makes sense. In fact, 53% of people in this generation have no savings, with savings amounts rising with age.
UK average savings by age 30
By 30 years old, the marker is to have saved an amount equal to your annual salary.
The majority of 30-year-olds in the UK fall substantially short of this mark. In 2020, around 40% of UK adults under 30 didn’t have savings, while 10% managed to save between £2,000 and £3,000.
Around 25% of the average person under 30 had saved more than £6,000.
UK average savings by age 40
At 40 years old in the UK, the average person should typically have triple their annual salary in savings.
The average savings for those aged 25-34 was £3,544 in 2020, and 35 to 44-year-olds had average savings of £5,995.
At 40, the average savings in the UK was £124,911, but bear in mind, the billionaire example I used earlier. The same applies in this instance.
UK average savings over age 50
In 2020, by 55 years of age, 2.23% of UK people had no savings to speak of.
Those over 55 showed the largest savings, with a UK savings of £20,028.
People aged between 45 and 54 had an average savings of £11,013.
By 50, the average savings (not the median average) is £198,390, with 60-year-olds saving approximately £270,100.
UK median savings rate per age group
The UK median savings rate per age group is calculated as a percentage of their average UK savings amount to their disposable income.
The median rate per age group in 2022 is as follows:-
- Persons under 35: -0.13%
- Persons 35-44: 9.1%
- Persons 45-54: 10.4%
- Persons 55-64: 8.5%
- Persons 65-74: 11.2%
- Persons 75 and over: 11.4%
The overall UK median savings rate for all age groups combined is 8.8%.
UK average retirement savings
The average savings made by retired people aged 65 and over amounts to £113,600. This figure includes cash ISAs, savings and current accounts, trusts, stocks and bonds. The median average savings is much lower, at £25,700.
A 2021 Finder analysis shows that 47% of people have ensured they’ve saved for retirement, 23% save on occasion, and 13% have saved in the past but no longer do. 12% are still going to start saving, and 5% of people have never done retirement saving and won’t be saving in the future.
Ways to save money in the UK
The upsurge in the cost of living in the UK has made it increasingly necessary for Britons to save money. There are several things that people are trying to bring down average household bills, expenses and possibly allow them to save in the way they’re accustomed to. According to a recent analysis, people are attempting the following to save pennies:
- 82% are turning off their lights more frequently.
- 64% are not visiting restaurants and night spots as often.
- 58% are not ordering takeaways.
- 56% are cutting down on their groceries.
- 53% have reduced their use of appliances.
- 50% are not driving or using public transport as often.
- 42% have changed the shops they visit.
These regular changes of habit can reduce costs considerably when you add them up. There are a few less obvious methods to make extra funds available for saving.
Other potential ways of saving more in the UK
I think everybody would like to have more income to put into savings, meaning they can use their hard-earned cash in other ways. There are possible sources of additional income you can check up on. You never know; you might be lucky.
Locate possible missing pensions
Pension funds can get lost through the years. The Association of British Insurers estimates that £19.4 billion is floating around in unclaimed pensions, so I’m not really reaching by suggesting this. If you consider how often you have changed jobs, homes and contact details since the 80s or 90s, something may have been lost in the mail.
Look into your existing investments
Sometimes we invest money and leave it alone to stagnate. Retirement funds are certainly a case in point as these are commonly placed on the back burner when changing employment. There’s a good chance that these types of investments may not be solid. You could make thousands of pounds by checking up and changing where the money’s invested.
What is the expected savings data for UK households over 2022?
The household saving rate in the United Kingdom increased from the first quarter’s 6.60% to 7.80% in the second quarter of 2022. Predictions are that future rates will show a downward savings trend due to the escalation in cost of living expenses, especially fuel costs.
What should I do to increase my £50,000 savings?
Investing in property with 50K is likely the best way to invest in 2022. You should probably speak to a financial advisor before making a final investment decision. You’ll need to know your risk tolerance before deciding where to invest. Depositing your money in a saving account is the most secure way to invest 50k.
How can I save £20,000 in a year in the UK?
Change your spending habits and reduce your rental by moving into a smaller home. Think of a way to use your expertise or find a part-time job. Try to save every pound by buying better and switching off your lights more often.