Brits raid savings to cover spiralling costs

As the economic downturn deepens, Britons are having to raid larger amounts of money from their existing savings to cope with the rising cost of living according to new research from Birmingham Midshires.

Representing an acceleration of the trends revealed by the last Saving Britain series in May 2008, people have raided £434 in the last three months - a seven per cent increase on 2007 (£406). Meanwhile, although the current financial climate is forcing people to tighten their purse strings, Britons are still managing to put money aside into their savings accounts. In the last quarter, Brits have saved an average of £516, a slight decrease on the same period last year (£565).

At a time when the rate of inflation has reached 4.4%, new research from the Saving Britain campaign suggests that Britons actually need to find as much as 16 per cent more cash to cover living costs.

Birmingham Midshires asked a GB representative sample of more than 2,000 adults how much money they had saved in the last three months and whether they had raided their savings in the same time period. The results suggest that Britons are raiding their savings more as people are struggling to afford everyday living costs.

Over the past three months, Britons raided an average of £434, a seven per cent increase from £406 last year. Older savers felt the pinch more than most with the over-55s raiding an average £806 – an 18 per cent increase on £683 a year ago. This echoes recent research from Birmingham Midshires, which suggested older savers were increasingly been asked for support by younger family members.

The main reasons for raiding remain very similar year on year – one third of the country have raided their savings to pay for unexpected bills, almost one in four (23%) raided for a holiday and one in five (19%) had to pay for unforeseen emergencies.

Those in the south of England have raided most, siphoning £730 from their savings, a dramatic 36 per cent jump on £537 in 2007. Given the current economic climate, an impressive 58 per cent said they have not raided a penny of their savings in the last three months, although that is down from 63 per cent in 2007. Forty per cent admitted to raiding, representing a growing group which struggles to manage their finances. Of these, an alarming one in five people raided between £1000 and £5000.

Although the cost of living is continuing to rise, 75 per cent of Britons managed to save something in the last three months, with one in ten (11%) managing to save between £1,000 and £5,000. Only one per cent of the country managed to save upwards of £5,000.

Tim Hague, Director of Savings and Investments at Birmingham Midshires commented: “We appreciate that in today’s financial climate, it is proving extremely difficult to put money aside as people are having to spend more on their day-to-day living costs. However, the fact that people are still managing to put significant amounts of money into savings is an encouraging sign for the times ahead.

It is for this reason that we continue to provide market leading savings accounts so that whatever people are managing to put aside, BM is helping to maximise the growth of their saving.”

For more information, visit askbm.co.uk