1. Context
2. The study
3. Key findings
4. Points to consider

Context

Which? wants to work with government and industry to develop joined up proposals for a comprehensive savings strategy to get the UK saving.

Saving for retirement has received considerable attention from policy makers and government in recent years, but the question of how best to encourage people to build and maintain a short-term savings buffer has received less attention.

Four in ten consumers say they find it difficult to cope with an unexpected expense, and five in ten are concerned about their level of savings. (Which? Consumer Insight Tracker 2013 – 2014). There is evidence of reduced levels of saving: UK households saved 7.3% of their disposable income in 2012, but by the first quarter of 2014 this had dropped to 4.9% (ONS: www.ons.gov.uk/ons/datasets-and-tables/data-selector.html?cdid=NRJS&dataset=qna&table-id=J3). One in four households has no savings at all.

The study

The research used a mixed methods approach, including surveying a UK nationally representative sample of over 4,000 people about their savings behaviour and attitudes, using statistical analysis to segment households into 10 distinct groups of savers and non-savers and conducting 15 in-depth telephone interviews with three of these groups:

• The Habitual Savers
• The Lifestyle Savers
• The Struggling Savers

The report considers the differences between the Habitual Savers and the other groups of savers, as well as at the contrast with a group of non-savers, who could afford to save but do not.

Key findings

• Lack of financial resilience with four in ten (41%) stating their household could not last three months without their main source of income, a third (32%) stating the longest they could last is a month and one in six (17%) stating they would not be able to last any time at all
• Savings provide households with resilience and peace of mind - households without three months’ worth of essential expenditure in savings are significantly more likely to have defaulted on a loan, rent or mortgage payment in the last month, and are also more likely to have taken out high cost credit
• Financial and behavioural barriers prevent more people saving - a significant minority of people say that they do not save because they prefer to spend money now and this relates to tendencies to value the present more highly than the future, to view putting money aside as a loss in terms of current spending and to be overly optimistic about future financial health.
• Factors related to habitual saving –the research presents differences related to age and socio-economic factors and identifies three main behaviours that are strongly linked both with having a three months’ recommended buffer and with saving sustainably – saving every month, saving for a rainy day (rather than a specific goal) and keeping savings separate from other money
• Strategies proposed for improving the savings culture include encouraging short-term saving through workplace auto-enrolment incentive schemes; using debt repayment as a springboard to develop savings habits; stressing the material and emotional benefits of saving; changing incentives to save through use of small rewards and support in keeping savings separate
• The report calls on government to develop a comprehensive savings strategy aimed at increasing the number of people with a savings buffer of three months’ essential spending.

Points to consider

• • There is no information provided on: the survey data collection method, sampling methodology or the segmentation methodology. As such it is not possible to assess the robustness of the quantitative findings.
• • Those with an interest in increasing short term saving patterns and saving behaviour in general.
  • Also presents strategies for improving the savings culture (i.e. policy change).
• • The report states that saving could be encouraged by taking advantage of behavioural insights to develop principles for creating a range of savings products designed to work with consumers’ existing behaviour such as employees being ‘auto-enrolled’ in savings schemes to encourage saving every month.
  • It also calls on the Government to develop a comprehensive savings strategy aimed at increasing the number of people with a savings buffer of three months’ essential spending.

Full report

The three habits of successful savers - full report