Interest rates have plummeted in the last year, as the Bank of England took a decision to reduce its base rate to an historic low of 0.1 percent. This choice had a knock on effect for savers who have been left with limited options, and may feel a lack of motivation to put money away. However, despite this perhaps being a disincentive, savers are being encouraged to take action with their funds.
This is as recent analysis has revealed half of Britons do not have any money set aside in an emergency fund – which could prove devastating should the worst happen.
Research undertaken by Aldermore has shown 47 percent of those asked do not have money put aside for serious crises or life events such as unemployment, legal trouble or serious illness.
Despite this period of economic uncertainty and financial shock, many Britons have been left vulnerable to sudden life setbacks which can often come at a high cost.
Some 33 percent of those asked told the bank they did have an emergency fund, but only to cover living costs for one month.
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“Going through an unexpected life setback can be extremely stressful and emotionally bruising, so it is vital that people plan and prepare to avoid financial pressures piling up that can make a bad situation worse.
“Getting into a savings routine can add a strong sense of security for people’s future as it acts as a buffer for the unexpected in life.
“It may never need to be used for setbacks or major emergencies, and eventually be used on happier things, but having it there is worth the peace of mind.”
To help Britons who are just about to embark upon building this kind of fund, Aldermore has provided top tips to start with.
Firstly, savers should be checking where their money is currently being held to analyse interest rates.
While interest rates are at shocking lows at present, the bank has advised that it is better to earn something than nothing at all, particularly as savers will often be able to benefit from compound interest.
Next, cutting down on unnecessary sending can be important, and this is a step many people have taken, albeit involuntarily, over the last year.
Reducing spending on lunch or coffee can add up over time, and help Britons to put more towards their savings goals.
In a similar sense, Aldermore encourages cancelling direct debits, something the bank says can “drain savings potential”.
Some memberships may be worth cancelling altogether, while others may be cheaper to pay in annual instalments rather than monthly.
Finally, Britons should be looking at reviewing their savings habits on a regular basis.
For those who are having difficulty in meeting their target amount, monthly contributions can be reduced to make things more manageable.
However, in circumstances where a person receives a pay rise, an unexpected sum of money, or a financial gift, then these contributions could be increased.