Savings suffer as Christmas spending takes its toll

31 January 2015

  • A third of savers (30%) added nothing to their savings in the final three months of the year
  • A quarter of savers (26%) were forced to raid their savings in the same period to cover unexpected costs
  • The average amount raided, at £1,405, was almost double the average total saved, £766

The nation’s Savings accounts suffered a setback in the run up to Christmas, as a third of those with savings admitted to not adding anything to their nest egg, whilst one in four savers had to unexpectedly raid their accounts to cover additional spending, according to the latest research from Halifax.

Saving vs. Raiding
Four-fifths (81%) of British adults say that they have some form of savingsi currently, with the average balance stated at just below £18,000 (£17,945) for Q4 2014, this is significantly below the average for the same period the previous year, which stood at almost £24,000 (£23,790).

However, of those with savings around a third (30%) hasn’t saved anything in the past three months. Additionally, the average amount saved by those with savings over the past three months stands at £766, slightly lower than the £770 saved over the same period in 2013.

At the same time, one in four (26%) savers say that they were forced to raid their savings to pay for unexpected costs or bills, with an average of £1,405 coming out of savings over the same period.

The main reason for dipping into savings was for a holiday or to cover the costs of emergency home or car repairs with one in seven (14%) raiders stating one of these two reasons. Additionally, one in 10 cited overspending on their current account (11%), and the same on impulse gifts or luxury shopping (11%) indicating that overspending at Christmas was likely a key factor.

Saving levels falling short
Based on the latest Halifax data, savers have an average balance equivalent to 35%ii of gross annual earnings. However, the research indicates that consumers were saving just over £250 a month on average in the last quarter, meaning they managed to save an amount equivalent to just 11% of their gross monthly income in the three months to December, well below the long run average.

The weakness in savings during the final months of 2014 is likely to have been influenced by heavy discounting by UK retailers around "Black Friday", which not only saw consumers bring forward their Christmas spending, but encouraged them to spend even more.

Protecting the nest egg
Only one in four (25%) savers say that they maintain a buffer limit on their nest egg, with the average amount they try not to let their savings dip below standing at over £10,000 (£10,797) for Q4 2014.
The average buffer limit currently stands at the equivalent of 39% of gross annual average earnings, or just under five months pay. However, only a quarter of savers maintain a buffer, with the vast majority (three quarters) not maintaining a minimum balance. Additionally, of these cautious savers who do try to maintain a buffer, one in five (19%) has admitted to dropping below the limit they have set for themselves since October last year.

Philip Robinson, Savings Director, Halifax, says: “Improving consumer confidence in 2014 boosted spending, particularly in the latter months of the year, however it seems to have had a knock on effect with low levels of savings over the same period.

“Saving regularly is important to building and maintaining a savings base, which will protect households in the event of a change in circumstances or unexpected expenses. Whilst we expect a certain level of raiding of savings in the run up to Christmas, if savers’ balances continue to decrease year on year it would represent a worrying trend for household finances."

Additional Information:

  • Savers in the south east saved the most in the last quarter, putting aside an average of £1,238 over that time; whilst those in the Midlands who raided their savings withdrew the highest balances, at an average of £1,761.
  • Women were more likely than men to dip into their savings, 28% and 24% respectively, but on average men who raided their savings were taking out more than their female counterparts, an average of £1,768 compared to £1,089 for women.
  • Those aged between 45-54 years who raided their savings old plundered the most from their savings, raiding an average of £2,594 over the three month period.
  • Those in retirement age (over 65s) saved just £555 – the lowest for all age groups - in the last three months of 2014; 27% below the average for all for all savers (£766).