A new study suggests that having a savings pot can be a ‘turning point’ for households
A study has revealed that having a savings pot of £2,000 could be a ‘turning point’ for households, significantly reducing the risk of falling behind on bills. The research, conducted by the University of Bristol’s Personal Finance Research Centre, suggests that a household with this buffer could have a 60 per cent lower chance of falling into arrears or problem debt than an equivalent household with less than £200 saved or no savings at all.
While the report pinpointed £2,000 as a crucial protective threshold, it also suggested that this target should not be viewed as a minimum requirement. It proposes that having just one month’s income set aside could potentially reduce the odds of falling behind with bills by nearly 75 per cent.
The researchers discovered that even saving £200 or more could potentially decrease the chances of financial difficulties, reports the Daily Record. The study was based on an analysis of data from the Understanding Society survey, allowing researchers to monitor the finances of about 7,000 people over a decade.
Commissioned by the Building Societies Association (BSA) for UK Savings Week in September, the study also found that having a basic savings account in the first place can act as a ‘gateway’ for people to open other financial products, such as Isas and investments.
Households with a mix of savings and investment products were five times more likely to report living comfortably than those without any, the research suggested. Setting a savings goal that is realistic and achievable for someone’s personal circumstances, and saving regularly, can be crucial to success, the research indicated.
Andrew Gall, head of savings and economics at the BSA said: “We appreciate that for some families £2,000 may feel out of reach right now. But, the research has demonstrated that even small, regular savings, such as £10 a month, will build resilience over time and improve people’s wellbeing.
“Just as important, the findings show how a simple savings account is often the first step to achieving longer-term financial goals. People with good savings habits are far more likely to go on to have other savings and investments, which in turn can lead to positive outcomes such as becoming a homeowner.
“And this report makes clear that there’s more we can do. From payroll savings to better financial education, there are practical steps that can help the nation have better savings habits. Everybody’s savings journey has to start somewhere.”
Sara Davies, associate professor at the University of Bristol and part of the research team said: “This research reaffirms the protective effect of holding a financial buffer, giving households a bit more room for manoeuvre should they face an unexpected expense or shock to their income.”
