October 2017: More than half of British workers are struggling to understand the basics of saving and would welcome access to financial education, our research shows.
As inflation hits 3%, the study also reveals the fallout of this lack of saving knowledge – with a fifth of working people less than a month away from bankruptcy and over 40 per cent saving nothing for retirement each month.
From our own survey, 51 per cent of UK workers admit to having a poor understanding of how to get real terms growth from their savings.
Savings was identified as the financial topic workers would most like to learn more about – and the savings habits uncovered in our report show why.
Researchers found that 21 per cent of people could not support themselves for longer than a month with their current savings if they lost their job. Meanwhile, 45 per cent of workers claim to have saved nothing into their pension pots in the last three months.
Our findings show that the average amount savers believe is required to fund a comfortable retirement is £23,000 per year.
Current saving habits, however, are setting many Britons up for struggles in later life by building retirement funds which will fall far short of providing that amount each year.
Our ongoing research has identified a lack of financial education as a root cause of this savings gap. In response, we launched the True Potential Centre for the Public Understanding of Finance (PUFin), which runs financial education courses in partnership with the Open University. In the last quarter, the number of people who have enrolled on our free personal finance courses since 2014 hit the 350,000 mark.
The institution is now rolling out its Managing My Money course for schools, with the aim of giving 16 to 18-year-olds the best possible start to their personal finance journey.
But our managing partner David Harrison says more action is needed to boost personal finance awareness, especially around the corrosive effects of inflation and therefore narrow the savings gap.
He said: “In this country, people are not taught at a young age how to save and the importance of doing so. No wonder then that most people put their money in cash savings accounts that are easily beaten by inflation, which has now hit 3% – well beyond high street savings accounts. The answer is to invest but there are so many risk warnings that put people off.
“Our courses and research show that there is a real appetite to learn more about money and how to beat bank interest, in fact it’s one of the positive outcomes of the banking crash. We have a minister for financial inclusion now and a City watchdog that is committed to closing the Savings Gap. They need to ensure that personal finance makes its way into all classrooms now.”
Our latest quarterly survey, as part of its Savings Gap campaign, questioned 2010 people from across the UK. During the last four years, over 30,000 savers have contributed to the study.