How Much Money Does the Average Person Save in the UK?

Saving money is something everyone strives for, but the amount people are able to save varies greatly depending on a number of factors. These include age, income, lifestyle, and even where they live. In this article, we’ll explore the average savings for people in the UK across various demographics, as well as provide insights into how savings differ by region. By the end, you'll have a good understanding of how much the average person saves in the UK.

Why Is Understanding Savings Important?

Before diving into the numbers, it's important to understand why knowing how much people save matters. First, savings are an essential part of financial health. Whether it's for an emergency fund, retirement, or a major life event, having money set aside provides peace of mind. Additionally, understanding the average savings can help identify trends and challenges that affect personal finance across the nation. So, how much is the average person saving in the UK? Let’s break it down.

Average Savings by Age Group

One of the most important factors in determining how much a person saves is their age. Younger people may have fewer savings because they are just starting their careers or dealing with student loans, while older individuals, especially those nearing retirement, may have accumulated more savings.

Savings for People Under 25

For individuals under the age of 25, saving money is often a challenge. Many people in this age group are just starting out in their careers, dealing with the cost of living, and potentially carrying student loan debt. As a result, their savings rate is generally lower than that of older individuals.

• Average Savings: According to recent data from the Office for National Statistics (ONS), individuals under the age of 25 have an average savings of approximately £1,000. However, many may not have any savings at all.

• Challenges: Student debt, the cost of housing, and low starting salaries can make it difficult for young people to build up substantial savings.

Savings for People Aged 25 to 34

In the 25-34 age group, people are typically starting to establish themselves in their careers, and many are getting married or buying homes. These life events often lead to more financial responsibility, which can affect their savings.

• Average Savings: The average person in this age group saves around £3,000 to £4,000.

• Challenges: While they may earn more than those under 25, their expenses—such as mortgages, rent, childcare, and other family-related costs—often limit their ability to save large amounts.

Savings for People Aged 35 to 44

People in their mid-30s to mid-40s are often more financially stable. Many will have paid off some of their debts, such as student loans, and are focused on saving for their future, whether it's for retirement or their children’s education.

• Average Savings: The average savings in this age group is approximately £5,000 to £8,000, depending on income and lifestyle.

• Challenges: While many people in this group may have more disposable income, they are also likely dealing with significant ongoing costs, including mortgage payments, children’s expenses, and other family-related financial obligations.

Savings for People Aged 45 to 54

In the 45-54 age bracket, many individuals are at the peak of their careers and earning potential. They might be saving for retirement and preparing for major life transitions, such as sending their children off to university or downsizing their homes.

• Average Savings: According to a study by Standard Life, people in this age group have an average of £20,000 in savings.

• Challenges: Despite earning more, some people in this age group may be juggling mortgages, helping children with university fees, or taking care of aging parents, which can reduce their ability to save more aggressively.

Savings for People Aged 55 and Older

For people over 55, saving money becomes more focused on retirement, and many may be looking to wind down their careers or already be retired. The level of savings at this stage of life can vary greatly, with some individuals having significant retirement funds and others having limited savings.

• Average Savings: People aged 55 and older often have savings in the range of £25,000 to £50,000, depending on their pre-retirement income and how early they started saving for retirement.

• Challenges: Those nearing retirement without adequate savings may face significant challenges, particularly with rising living costs and healthcare needs.

Lack of Financial Education and Planning

A third major reason people in the UK struggle to save is a general lack of financial education and long-term financial planning. While some people may receive financial guidance through their family or education, many do not have the tools or knowledge needed to effectively manage their money. Basic financial literacy, including understanding how to budget, save, and invest, is often overlooked in the UK school curriculum. Without this knowledge, many individuals struggle to make informed financial decisions and prioritize saving for the future. For example, people may not fully understand the importance of having an emergency fund or how much to save for retirement. This lack of awareness can lead to people living pay check to pay check, with no safety net to fall back on when unexpected expenses arise. Additionally, many people don’t know how to make their savings work for them, such as by using tax-efficient accounts like ISAs or taking advantage of employer pension schemes. Without proper financial planning, it's easy to see why many people are left with little to no savings by the time they reach retirement age. Unfortunately, without a structured approach to managing money, it’s difficult to create the habits needed for successful saving, meaning that people may be more focused on immediate needs rather than long-term financial security.

Debt and Credit Dependency

Another significant factor contributing to the difficulty of saving in the UK is the widespread reliance on credit and personal debt. In recent years, consumer debt has become increasingly common, with people turning to credit cards, loans, and payday lenders to cover immediate expenses. The average household debt in the UK has reached over £60,000, which includes mortgages, credit card debt, and personal loans. For many people, taking on debt is an unavoidable consequence of rising living costs, particularly in the face of housing prices, student loans, and family obligations. However, managing this debt often requires making monthly repayments, which further limits disposable income. Rather than being able to allocate money into a savings account, much of the income is absorbed by servicing existing debt, creating a cycle where individuals find it difficult to break free and start saving. This reliance on credit can also have a psychological impact, where people become accustomed to living beyond their means, making it harder to adjust to a more savings-focused lifestyle. Additionally, the interest rates on credit cards and loans can be high, meaning that individuals end up paying far more than they originally borrowed, compounding their financial stress. As a result, debt becomes a major barrier to building wealth or saving for the future, creating a challenging financial environment for many people in the UK.

Regional Differences in Savings

Another major factor influencing how much a person saves is where they live. The cost of living can vary greatly from one region to another, and this directly impacts people’s ability to save.

Savings in London and the Southeast

London and the surrounding Southeast of England are known for their high cost of living. Housing prices are often far higher than in other parts of the country, meaning many residents spend a large portion of their income on rent or mortgages.

• Average Savings: In London, average savings are much lower than in other areas of the UK, with many people having less than £2,000 saved. In the Southeast, the average is slightly higher at around £3,500.

• Challenges: The high cost of housing and living expenses in these areas leave little room for people to build savings, even for higher-income earners.

Savings in the North of England

The cost of living is lower in many areas of the North of England, such as Yorkshire and the Northwest. While salaries tend to be lower here than in London, people may have more disposable income due to lower housing and transport costs.

• Average Savings: In these regions, average savings can range from £4,000 to £6,000.

• Challenges: Lower wages and fewer high-paying job opportunities can limit overall savings for residents in these areas.

Savings in Scotland, Wales, and Northern Ireland

Scotland, Wales, and Northern Ireland also have regional variations in terms of cost of living. Generally, these areas have lower housing costs, but salaries can also be lower, which affects the overall ability to save.

• Average Savings: In Scotland, the average savings are around £4,500, while in Wales and Northern Ireland, the average savings are similar, ranging between £3,000 and £5,000.

• Challenges: As with other regions outside of London, lower wages and fewer job opportunities in certain sectors can make it more difficult for people to build up significant savings.

The Impact of High Living Costs on Savings

One of the primary reasons many people in the UK struggle to save is the high cost of living. Over the years, the cost of housing, food, utilities, and transport has risen significantly, outpacing income growth for many individuals. In particular, housing costs—whether through rent or mortgage payments—take up a large proportion of people's income. In cities like London, the cost of living is astronomical, and for many people, a substantial chunk of their monthly income goes directly into paying for housing. With the average rent for a one-bedroom flat in London standing at approximately £1,500 per month, it leaves little room for saving, even for those earning decent salaries. Outside of the capital, housing may be more affordable, but it's still a significant strain on household budgets, especially for younger people who are trying to break into the housing market. Furthermore, food prices have increased dramatically in recent years, with some staple products seeing noticeable price hikes. This has put even more pressure on household budgets, leaving less disposable income for savings. Other essential expenses, such as utility bills and transport costs, have similarly climbed, making it increasingly difficult for individuals to set aside money. These rising costs often mean that saving becomes a lower priority, and for many people, simply making ends meet takes precedence over building up savings. Ultimately, the squeeze on household budgets across the UK highlights a critical issue: even with stable employment, the soaring costs of day-to-day living leave people with little to no room to save.

Factors Affecting Savings Rates

Several factors influence how much the average person is able to save in the UK. Some of these are personal, while others are external or societal. Here are some key factors:

1. Income: Simply put, the higher the income, the more a person can save. However, this doesn’t always translate into higher savings, as increased income often comes with increased expenses.

2. Cost of Living: As discussed, where you live plays a huge role in how much money you can put aside. Areas with high housing costs, like London, make it harder to save, even with a relatively high salary.

3. Debt: Student loans, credit card debt, and personal loans can all limit how much people can save. Those with fewer financial obligations often have higher savings rates.

4. Financial Awareness: People who are more financially educated tend to save more. Understanding the importance of saving early and using tools like ISAs and pensions can make a significant difference.

5. Cultural Attitudes Toward Saving: In some cultures, people are more inclined to save, while in others, spending may be seen as more important. The UK generally has a fairly conservative attitude toward saving, but this can vary depending on the individual.

How Can You Increase Your Savings?

Now that we've established how much the average person saves in the UK, let's talk about how you can boost your own savings.

• Create a Budget: Keeping track of your income and expenses can help identify areas where you can cut back.

• Set Up Automatic Savings: Set up automatic transfers to your savings account as soon as you get paid. This helps ensure that saving becomes a priority, rather than something you do only when you have extra cash.

• Take Advantage of Tax-Free Savings: Utilize ISAs (Individual Savings Accounts) to save money without paying tax on the interest earned.

• Reduce Non-Essential Spending: Cutting down on luxuries like eating out or expensive holidays can free up more cash for savings.

Saving your money may be challenging but it is also important to understand what to do with your savings to ensure a brighter future for facts and stats on pensions, visit our recent article Importance of Starting a Pension Young in the UK

Conclusion

So, how much money does the average person save in the UK? The answer varies depending on age, income, and location, but overall, savings tend to be low for younger individuals and those living in expensive areas like London. As people age and their income increases, so too do their savings. However, rising living costs and ongoing debt challenges make it difficult for many to put away substantial amounts.

If you're looking to improve your own savings rate, start by tracking your expenses, setting goals, and finding ways to reduce unnecessary spending. With a little effort, it's possible to build up a healthy savings account, no matter your stage of life or where you live in the UK.