Research this week from internet bank First Direct revealed that 28% of UK households have less than £250 in accessible savings. Worse still, 21% were said to have no nest egg whatsoever.
The survey of over 1,000 households found that those aged between 25 and 34 were least prepared for a financial emergency – 39% have less than £250 in savings, while 30% said they had nothing set aside at all.
These are worrying figures – financial experts recommend we each have savings equal to at least three months’ salary in the event we’re made redundant or are unable to work.
But with average monthly household outgoings currently around £1,536, savings of £250 would barely stretch to five days.
While these stats may seem alarming, a more positive picture emerged from recent findings by National Savings and Investments, which showed that young males aged between 25-34 are saving an average of £104 each month – well above the national average of £88.
So, whether you’re currently managing to put aside money for emergencies or you’re feeling the New Year squeeze, check out our top three tips to help you build up a bigger savings pot in 2012.
1. Make use of your ISA allowance
Between now and April, you’re able to save up £10,680 in an Individual Savings Account (ISA), half of which (£5,340) can be cash.
Make sure you use up your full cash ISA allowance now before you start saving elsewhere – ISA interest isn’t taxed, so you’ll be maximising your savings benefits.
2. Clear any existing debt first
Any interest you pay on your debts will usually outweigh any interest earned on your savings, so it makes sense to try to pay off any existing bills before you start saving.
Moving your credit card debt onto a 0% on balance transfers card could be a good place to start – the current best deals now offer up to two years interest-free.
3. Shop around for top savings deals
Shopping around for competitive savings rates will help ensure you’re making the most of your emergency fund.
The best instant-access savings accounts currently pay around 3% interest, while locking your savings into a two-year deal could net you 4% and above.