The study

In order to inform the UK Financial Capability Strategy, the study reviews barriers to saving in the UK and assesses UK and international evidence about the effectiveness of savings interventions. It identifies gaps and areas for potential future research. The main focuses are people of working age, those on low to middle incomes, adult cash savings (rather than investments or savings for children) and community-based interventions. As well as more formal research studies and evaluations, the report draws evidence from official data and statistics, think pieces and policy briefs.

Key findings

• • About two-thirds of households had some form of savings; about half were actively putting money aside. About a quarter of working-age adults had no savings at all and a similar proportion has less than £1000 saved.
  • Older people, those with families and people with higher incomes were more likely to save. Household income was the biggest predictor of saving behaviour, while losing jobs or income or moving from employment into self-employment were the strongest factors in reducing saving. People who thought ahead about finance were also more likely to save.
  • While people on low incomes are a clear potential audience for interventions, they often have less money available to save.
  • The MAS financial capability model identifies a range of “money mindset” factors that promote or inhibit savings behaviour, with saving often being something of a choice and reflecting perceptions of personal financial situations.
  • At the time of writing, historically low interest rates in the UK reduced incentives for people to save. Some households (including 9% of those on the lowest incomes) relied on informal savings methods rather than bank accounts.
• • Overall, evidence about the effectiveness of compulsory financial education is inconclusive. Although linking such requirements to Individual Development Accounts (IDA) in the US seems to have led to higher savings levels, other studies in the UK and the US suggest that such compulsion deters people from taking part.
  • While having a reason to save is likely to motivate saving behaviour, evidence about the effectiveness of such approaches is limited, notably in encouraging longer-term behavioural change.
  • There is some evidence that parental influence can develop savings habits in their children and that these last into later life.
  • Incentivising saving, as in the IDA approach, tended to create durable savings habits, reinforced through a cycle of success, although other studies show that doubts about capacity to change can undermine this. Tax incentives such as those offered by ISAs tend to be of little relevance for those on lower incomes.
  • “Automatic” or routine payments may help lower-income households to maintain savings habits.
  • Matched-savings approaches (including IDAs, Saving Gateway in the UK and learn$ave in Canada) often appear to encourage more saving, particularly when financial incentives are larger, but effects tend to be stronger among better-off participants, and it seems that savings invested in these vehicles have often simply been moved from elsewhere.
  • Prize-linked savings may offer a motivation for people to begin saving. There is little empirical evidence about their longer-term effectiveness and they have sometimes raised concerns about promotion of gambling.

Areas for further research

• Typically offered through smartphone apps, savings motivators often rely on “impulse saving” or “small sacrifices” to encourage easy saving, although relevant technology is most popular among younger, better-off and urban users, and often excludes many likely target recipients of savings initiatives.
• Campaigns and messaging may attempt to counter unhelpful perceptions about saving or offer examples of successful approaches to saving. The success of such approaches may be related to such factors as the use of plain language and indeed the relationship between the present and future tense in specific languages.
• While rules of thumb in relation to saving may be useful and practical, they may often become unrealistic over time or between individuals.
• There is growing interest in approaches that draw on behavioural economics, such as topping up loan repayments with an element of saving, or linking savings and spending accounts.

Points to consider

• The review follows strict criteria about evidence levels and so is unlikely to over-report.
• The report is closely linked to the Financial Capability Strategy for the UK.

Full report

Savings evidence review -full report