22 Jan 2018 Short term saving is dominating Brit’s savings habits, with two in five (35%) 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 a third of consumers (29%) view saving to provide a retirement income as a priority, while around a quarter are prioritising saving for a holiday. This long term saving gap is particularly significant amongst millennials (those aged between 18-34) who stand most to gain when thinking longer-term, where saving for retirement ranked even lower on their list of priorities with just 16% 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 a third of UK adults use a standard savings account as their preferred way to save while 27% opt for cash ISAs and 15% 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 9% and Stocks and shares at just 10%.
This attitude calls for improved education, amongst 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 ten, 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 commented:
“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.”
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