Credit crunch caution, Brits save any extra cash

Brits are taking a cautious approach to their cash during the recession, research from Fairinvestment.co.uk has found.

The study found that 44 per cent of Brits would save any extra cash they had at the end of each month, suggesting a cautious approach to money as credit becomes scarce.

Meanwhile, just 10 per cent of survey respondents said they would blow any extra cash they had on luxuries like make-up, clothes and CDs.

In addition to the high percentage of people for whom saving is the number one priority when it comes to extra cash, paying off debts comes first for 26 per cent of Brits.

And, on top of the 26 per cent of Brits who would use the extra cash to clear their debts, a savvy six per cent would use the money to make mortgage overpayments.

However, budgets are being stretched to the max for the 12 per cent of Brits who would use the extra cash to pay for essentials including food and utility bills, which have both suffered at the hands of the recession.

Commenting on the research, chartered financial planner at Fairinvestment.co.uk, Sharon Bratley said: "It is good to see that saving is important to so many people. However, although having a financial cushion is wise, it is also wise for people to pay off any debts they have first, which are likely to be charging high interest rates, and then save any extra cash.

"The low percentage of people who would choose to spend any extra cash on luxuries is also encouraging and suggests that Brits are being more careful with their money.

"Making overpayments on a mortgage, if allowed, would also be a smart move in the current financial climate, as house prices are falling, the more equity a homeowner owns, the stronger position they will be in if they have to remortgage any time soon.

"And, as the average savings account rate falls to near zero, paying off the mortgage early may work out more profitable than putting the money in a savings account.

"Having said that, there are still a few competitive savings deals around - the ISA deadline is coming up and a rate of three per cent is still available on the Birmingham Midshires Cash ISA. Fixed rate savings also offer higher returns, like the Halifax International Regular Saver offering a rate of four per cent fixed for 12 months."