A new report from UK Savings Week shows that having a savings habit helps people move from a vicious cycle of financial problems and poor mental health, to a virtuous cycle of improved resilience and better wellbeing.
The report, written by the Bristol University Personal Finance Research Centre and sponsored by Yorkshire Building Society, is based on analysis which looks at the relationship between savings and wellbeing and found that having a regular savings habit, no matter how small the amount saved, improves life satisfaction.
And it is those on the lowest incomes who are reaping the biggest benefits of putting a little aside, with 53% of savers in these groups saying they are satisfied with their life, compared to just 40% of low-income non-savers.
Low-income regular savers also enjoy similar levels of life satisfaction to non-savers on much higher incomes. This further demonstrates that the habit and action of saving is a key part of improving wellbeing, such as being more optimistic about the future, ability to relax, sleeping better at night, and being more satisfied with life overall.
The research tracks people’s saving over six survey waves covering a ten-year period. Someone who saved regularly in all six waves was 66% more likely to have high life satisfaction than a non-saver, regardless of income. A person who saved in one of the waves was 34% more likely to have high life satisfaction than a non-saver.
The report shows that whilst other life events, such as getting married have a bigger impact on mental wellbeing than starting a savings habit, regularly saving is an important building block towards positive life changes, protecting people against shocks and fostering a forward-looking attitude.
Commenting on the findings, Andrew Gall, Head of Savings at the Building Societies Association said:
“Whilst we appreciate that some people simply won’t be in a position to save right now, these report findings show why everyone should be encouraged to save a little, if they can, when they can.
“We know that having a pot of savings to fall back on can lead to reduced stress when something unexpected happens. But the wider benefits experienced by every level of saver, even those who can only put away a little, shows that it is the act of saving regularly, rather than the amount of money actually saved or accumulated, that improves our overall wellbeing and happiness with our life generally.
“The UK Savings Week campaign encourages organisations to promote the benefits of having and actively managing savings. Its overarching aim is to help individuals build their financial resilience and make their savings work as hard as possible for them.
“We hope that more organisations will engage with the campaign this year to help us to have an even bigger impact on improving the nation’s savings habits – and individual wellbeing!
Susan Allen, Chief Executive at Yorkshire Building Society added:
“At Yorkshire Building Society, we believe improving financial wellbeing is in everyone’s interests and that’s why we are proud to be playing a leading part in UK Savings Week this September and sponsoring this report. We want to help everyone understand how much a savings habit can help with their mental as well as financial health, and how having a savings safety net can increase happiness and help them reach their life goals.
“While we know the rising cost of living has put huge pressures on many households’ finances, this report demonstrates the positive impact even a small amount of savings can have on people’s life satisfaction. I’m delighted our branches, teams and colleagues will be on hand throughout UK Savings Week and beyond to help people across the county take their first, or next steps to building their financial resilience.”
