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Savings Takes Backseat With Many In UK

by Jim ONeil on March 1, 2012

in Personal Finance News

In a recent study, MoneySupermarket found that savings habits of UK residents have changed drastically during the past year. One-half of respondents to the survey indicated that they had reduced or stopped saving money. They are doing so for many reasons, most of which pertain to financial burdens placed upon them by the struggling economy.

Experts worry that this trend could become more commonplace in the near future, a sign of more bad things to come.

Approximately 47 percent of Brits have reduced the amount of money they save. About 12 million, or 52 percent, are doing this so they can pay daily living expenses. Eighteen percent are reducing savings so they can clear credit card and loans debt.

Some consolidate unsecured debts into one of the cheap loans that lower their interest payments. Others repay their debts individually, starting with those that have the highest interest rate.

Reduced income was listed as the reason that more than one-third of respondents can no longer save money. While this is understandable, the fact that an additional 19 percent claimed that they never saved is shocking. Without a financial cushion, consumers may find themselves in bad shape if unexpected expenses arise.

There may not be time to secure a bank loan, so these individuals resort to payday loans to cover short-term emergency needs for cash.

When asked where they had reduced or eliminated spending during the past year, most people said dining out. Going on holiday and buying new clothing were other popular responses. Some people even went so far as to reduce the frequency of haircuts or give up alcohol.

These responses indicate that many UK residents are taking their financial situation seriously and doing whatever they can to make ends meet. Though savings may not take top priority, consumers are limiting their spending to avoid getting into debt.

Kevin Mountford, MoneySupermarket head of banking, does not find the survey results surprising. He pointed to the current low interest rates and high cost of living as contributors to the reduction in savings. Though many people must cut back or eliminate saving in exchange for covering living expenses, he drew attention to a positive trend, calling consumer reduction in luxury spending “encouraging.”

This prioritization of finances shows that many consumers are dedicated to keeping themselves out of debt.

Mr. Mountford had a special message for those UK residents who are not saving at all. He urged these individuals to begin saving, even if they can only afford to put away a money in small increments. A few pounds saved each week will add up over time.

This money can be used to pay unexpected expenses or saved for retirement.

People should not be discouraged by low interest rates when saving their cash. Numerous investment options are available that offer higher returns and provide access to funds whenever needed. Consumers should take steps now to create a stable financial foundation.

Those with poor credit should improve their scores using tools like no credit check loans that report to credit bureaus.

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