Despite many having less money available, there is still a desire to save money, albeit some of the savings are having to be used to pay off debt.
According to research by AA Financial Services, the majority of people are trying to save as much as they can and continue or develop a savings habit.
People are generally taking care with their personal finances and giving prioirty to clearing debt as much as possible – according to the Bank of England, in December £377m debt was repaid by consumers, the biggest since records began in 1993.
Tackling debt and clearing balances on loans or credit cards of course cuts out interest payments and provides for the option to more readily be able to save.
Of concern though is many don’t know the interest rate they are earning on their savings accounts.
As Mark Huggins, director of AA Financial Services comments: “A third of respondents (33%) who do have savings admit they have no idea what interest rate they are earning. A quarter said that they never even check how much their savings earn.
“At a time when there is less money but with small improvements in interest rates, I would expect more people to be taking an interest in making their money work for them.”
When saving, more are turning to online saving accounts and whilst the majority use ‘high street’ banks, some are turning to non-bank providers such as the AA which often offer higher than average savings rates.
Instant-access accounts and cash ISAs remain by far the most popular vehicles for putting away money, while there is a small increase in the number of savers using a fixed rate account.
MoneyHighStreet comments: “‘Save a little, spend a little’ is a great motto to follow. Even small amounts saved, can, over time, turn into a sizeable amount.
“Clearly optimising where you put your money is vital. Using online savings accounts can often give you a better rate of interest and by their very nature can be easier to manage – from a PC rather than needing a physical visit to a branch.
“Do make sure you regularly check that you are getting the best interest rate you can. Often accounts will have an introductory bonus to attract your business but when this expires check what rate you get – it may be worth moving your money to another savings account at that point.
“Do consider saving for children too. Junior ISAs have now replaced the Child Trust Fund (CTF) and more accounts are being launched, including a Junior ISA from Lloyds TSB for example.”