Context

The Money and Pensions Service’s 2020 UK Strategy for Financial Wellbeing identifies a national goal, Nation of Savers, to get two million more ‘squeezed’ and ‘struggling’ adults in the UK saving regularly by 2030. Despite the challenges that people often face to putting money aside each month, particularly in the recent context of cost-of-living increases, many households do nonetheless manage to contribute to savings in some form. This is important for many reasons, including because research has evidenced a link between financial wellbeing and personal wellbeing.

Wellbeing in the context of the current study includes mental wellbeing, which is measured using the standardised SF-12 mental wellbeing scores and GHQ-12 (General Health Questionnaire-12 score). However, it is also defined as encompassing a broader spectrum of personal wellbeing concepts such as life satisfaction, sleep quality, feelings of closeness to others and energy levels.

The study

This study was undertaken on behalf of the Building Societies Association and Yorkshire Building Society to explore the positive short and long-term impacts of saving on people’s wellbeing and long-term goals, and how more people might be encouraged to start saving. It involved two main research elements:

• A rapid evidence review: The review used an established approach to the systematic review, synthesis and critical appraisal of literature from academic and grey sources from the UK and economically similar countries. It returned 40 items of UK which were reviewed in full, 36 of which were included in the review.
• Survey analysis: Understanding Society is a large-scale panel survey of people living in private households in the UK which has been running every year since 2009. It includes a range of measures of individual and household savings behaviour and the total amount saved and personal wellbeing which were subject to: cross-sectional analyses using a sample of around 26,000 respondents in 2021-2022, and longitudinal analyses using an available sample of around 9,000 respondents with data in six survey waves from 2010 to 2022.

Key findings

A positive relationship between saving and wellbeing

• The existing evidence pointed largely towards a positive relationship.
  • Those with savings, and those who save, are generally less anxious about money and have greater life satisfaction, even when accounting for income.
• The new analysis found that those who saved more had higher mental wellbeing scores, greater satisfaction with their life overall, more optimism about the future and better sleep, as well as other positive wellbeing outcomes.
  • For example, 47% of non-savers were ‘mostly’ or ‘completely’ satisfied with their life compared with 63% of those saving £300-399 per month.
• The statistical relationship between saving and wellbeing persisted even when characteristics such as age, marital status and health were accounted for.
• The effect of regular saving on outcomes was particularly strong.
  • Compared with someone who never managed to save in the same income quintile, someone saving regularly in just one of six survey waves had 34% higher odds of life satisfaction and someone saving regularly in all six waves had 66% higher odds.
  • The effect of regular saving was more marked among people on low incomes.

Mechanisms of effect

• Existing evidence and new analysis suggests that saving has a protective effect for wellbeing, improving it through a number of means including:
  • removing the need to borrow
  • preventing hardship and
  • building financial resilience and supporting an orientation towards future goals.

Encouraging saving

• The review of previous literatures points to the importance of:
  • implementing carefully-designed features, tools and incentives into product design
  • ensuring that savings product provision can flex to the different needs people have from them, and
  • rewarding the behaviour of saving rather than the amounts saved.

Points to consider

Methodological strengths or limitations

• The rapid evidence review, while not intended to be comprehensive, included an assessment of the quality of the evidence as well as its relevance.
• The study describes a robust approach including a rigorous analysis of large-scale, internationally-renowned survey data which has booster samples for key groups.
• Measures taken to ensure rigour in the analysis included a considered approach to using the right unit of analysis (individual and household), aggregation where appropriate, equivalisation of household income, and multivariate (regression and cluster) analysis.
• The authors also describe the definitions of the savings and outcomes measures they used in the accompanying technical appendix.
• ·The authors note that they largely employed descriptive analyses. They nonetheless undertook extensive statistical significance (at p<.05).
• Despite often strong evidence of correlation and nuanced longitudinal analysis, the authors note that causality cannot be established definitively.

Applicability

• The findings of the study can be used to justify continued efforts within policy and practice to improve the saving by individuals and households in the UK, and especially to focus on regular saving behaviour, as part of the landscape of interventions designed to improve personal wellbeing.

Relevance

• The findings are highly relevant given the Nation of Savers national goal set out in the Money and Pensions Service’s 2020 UK Financial Wellbeing Strategy.

Generalisability/transferability

• The findings are likely to generalise well to other countries with a similar economy to the UK.