Raiding the savings hits family nest egg

The current market climate is driving the trend for Jekyll and Hyde savers - as Brits rotate from a nation of willing savers to raiding their nest eggs to keep up with the ever increasing cost of living.

The five year view from Birmingham Midshires’ Saving Britain campaign has revealed that despite mounting pressures on disposable income, record numbers of people (69%) across the UK are putting money into their savings accounts; and the average amount of savings has also hit record levels.

Savings on the up

The report found that at the end of 2004, 61 percent of Britons - the equivalent of almost 30 million - set money aside in the previous three months. Rising consistently year-on-year, this figure has today reached 69 percent of the population.

The report found that the amount people saved has also risen consistently. In 2004, the average amount of savings in a three month period was £587 compared with £813 today - an increase of more than 38 percent.

Yet it seems people are struggling to leave their savings alone. While the amount saved has increased over time, so too has the amount raided. So much so that savers have moved from having a three month savings balance of £368 in 2004 to having a savings balance deficit of £148 in 2008.

Jason Robinson, director of savings operations at Birmingham Midshires commented on the findings: “We are pleased that the savings message is getting through and we are encouraged by the results that more people in the UK are today building up a nest egg. However, we must urge savers to be careful about the amount of money they are taking out of their savings accounts. The general rule of thumb is to have at least three months’ salary set aside in order to cope in the short-term with any financial emergency that comes along.”

Consistent rises in cost of living

The report delved into the reasons behind the increase in the amount and number of people raiding their savings. According to the Office of National Statistics (ONS), the average household expenditure has risen steadily over the past five years. This is most evident in fuel and power costs which have increased by 20% since 2004.

Cutting back on luxury spend

Rising bills have also meant that people in the UK have been forced to cut back on luxuries and leisure activities. Household expenditure on recreation and culture, clothing and footwear and alcoholic drinks and tobacco have all decreased since 2004.

Transport has consistently been the highest cost in the household budget since 2004, now at an average of £86.10 a week (a 4% increase since 2004). These figures follow a report last year exposing that people in the UK spend double the amount on fares compared to those in other European countries.

Jason Robinson, director of savings operations at Birmingham Midshires, commented on the findings: "While the figures clearly reveal that the cost of living is on the up, it is important that Britons adjust their savings accordingly. We urge people across the UK to continue the savings habit in a disciplined manner in order to build up a decent nest-egg over the long-term.”

Rachel Thrussell, Head of Savings at Moneyfacts.co.uk added: "The figures show that families have less disposable income than they once did and they are having to dip into any existing savings to get by. With savings rates at some of the highest levels we have seen for a while, there has never been a better time to build that nest egg back up again."