As a Chartered Financial Planner, I’m always interested in personal finance trends.
Our attitudes towards spending and saving often change over time based on different cultural factors.
It appear that, at the moment, we are due to save more and spend less.
The Centre for Economics and Business Research (CEBR) believes we will save a collective £20bn more during the next five years, taking our total savings to £90bn.
This will take our savings ratio, the amount of post-tax income we save, from 1.7% to a healthy 7%.
We can speculate about some of the reasons for this shift to savings.
Following the global banking crisis, few people want to put themselves again in the precarious position of relying on access to cheap debt to fund their lifestyles.
Having a cash savings safety net also offers a degree of comfort should the economic turn sour once again.
With wage inflation still lagging behind price inflation, it is little surprise that we should want to save rather than spend.
These predictions about a big boost to the savings rate also suggest that the current Bank of England policy of low interest rates is failing to encourage consumers to spend, rather than save.
As a result of such low interest rates, it is more important than ever before to consider your savings strategy carefully.
Shopping around for the most competitive interest rate, making best use of your tax-free allowances and reviewing your accounts on a regular basis are all essential, as is calculating the amount you need to keep in cash to meet your financial objectives.
