Short term saving is dominating Brit’s savings habits, with two in five (35 per cent) prioritising saving for a rainy day fund over any other financial milestone, according to the latest sentiment research from Foresters Friendly Society.
The findings reveal that less than one-third of consumers (29 per cent) view saving to provide a retirement income as a priority, while around one-quarter are prioritising saving for a holiday (26 per cent). This long term saving gap is particularly significant among millennials (those aged between 18 and 34 years) who stand to gain most when thinking longer term, where saving for retirement ranked even lower on their list of priorities, with just 16 per cent building up ‘nest eggs’ for their future.
This short termism is reflected in their savings choices, highlighting a significant lack of understanding when it comes to deciding how best to achieve these financial goals. More than one-third (34 per cent) of UK adults use a standard savings account as their preferred way to save while 27 per cent opt for cash ISAs and 15 per cent just use their current accounts.
In the current low interest environment, none of these vehicles is likely to deliver significant returns but shares based options, best suited to early saving, offering the potential for superior returns are not being embraced in significant numbers, with take-up of the Lifetime ISA at nine per cent and stocks and shares at just 10 per cent.
This attitude calls for improved education, among younger savers particularly on the importance and benefits of saving early in order to avoid them hampering their future saving progress. Fewer than one in 10 (nine per cent), for example, are taking advantage of the benefits from the Lifetime ISA (LISA) which was developed specifically to help those under 40 years old achieve their long-term savings goals.
Paul Osborn, chief executive for Foresters Friendly Society comments: “There’s a lot of talk about economic uncertainty, and we’re seeing inflation continue to outpace wage growth, so it’s little surprise that people are putting something away for a rainy day. But there’s a real worry that this is being done at the expense of their longer-term saving.
“Saving early and often is a great habit to get in to, but that’s only part of the savings puzzle. The next step is to identify the best way to achieve your goal. Interest rates continue to deliver meagre returns, so whether you’re saving for a house deposit or for retirement, it’s important that you give yourself the best chance.
"This means making use of government bonuses through schemes such as the Lifetime ISA, and taking the investment risks appropriate for your stage of the saving cycle. Savvy investing can make your savings goals much more achievable and can make your financial future much more secure.”
