Reality bites: lack of savings makes goals out of reach for many

The latest research from Aldermore’s 2017 Annual Savings Tracker reveals that over three fifths (61%) of the nation are saving, putting away an average of £2,748 a year. However, while it seems the savings message is recognised by the majority of people, the rate at which the nation is saving means that it could take considerable time to reach long term goals such as buying a house and significant home renovations.

Of those who are saving, almost three quarters (74%) are aiming for a specific goal. Younger savers in Britain are the most goal-orientated, with nearly nine in ten (87%) of 18-24 year olds wishing to reach a specific target, compared to only half (55%) of 65-74 year olds. However the nation isn’t saving consistently for these goals with the majority (37%) only putting money away if they have some left at the end of month, compared to under a third (29%) who save a fixed amount each month regardless.

Despite the nation making the important decision to save, it’s apparent there is a savings gap between reality and aspiration. Based on what Brits are saving on average, it will take a significant amount of time to reach the goals set.  For example, for those who have set the goal to renovate their home, the average cost of improving a kitchen is now £17,690, meaning it could take over six years to save for this.

For the younger generation, their primary goal is a deposit for their first home with over three in five (62%) aiming for this. With the average deposit for first time buyers now standing at nearly £50,000, this age group would need to set aside money for 21 years to reach the first rung of the housing ladder based on their average annual savings of £2,367.

The research also reveals the short term saving goals set by the nation. Saving for a holiday proves to be the number one choice for two in five savers (40%), and over a quarter (28%) is saving to provide a buffer for unexpected expenses.

Commenting on the findings, Simon Healy, Managing Director – Savings, Aldermore says: “It is encouraging to see that, despite the low interest rate environment, three fifths of the nation saves on a regular basis. Of these savers, a significant proportion has a specific goal in mind, highlighting that people are planning for their financial future. However, it’s clear that the current rate of saving will result in it taking longer than people expect to achieve their goals.

“Those who are able to establish a consistent saving habit, rather than just setting aside money they have left at the end of the month, will find it easiest to achieve their goals and there are steps everyone can take to ensure they are making the most of their savings. We encourage everyone to shop around online for the best interest rates and considering longer fixed term accounts can often be a better way of increasing returns. Savers, especially those lower rate tax payers exempt from Personal Savings Allowance, can also utilise the tax-free status of ISAs to keep more of the interest they earn and home-owners specifically should consider the Government backed Help to Buy: ISA, which offer extra bonus payments when saving a specific amount each month.”