The average British person needs £7,000 more in their savings pot in order to be financially secure, according to new research from Yorkshire Building Society’s The Nation’s Nest Egg report.
What did the research find?
The Nation’s Nest Egg research was conducted across 2,000 UK adults in partnership with the Centre for Economics and Business Research (CEBR) to assess the condition of British savings from 2019-2020.
The report found that the UK is facing a savings shortfall of £371 billion in the wake of the COVID-19 pandemic, leaving millions of households vulnerable to future financial shocks. British adults require £17,465 in their nest egg to feel “financially secure”, with the average person needing an additional £7,220 to reach this threshold.
However, many are still grappling with the impact of unemployment and reduced income on their savings, and could find it becomes even more difficult to put money away once the furlough scheme comes to an end on 30 September. You can read our article "Furlough pay changes: What you need to know" for more details on the wind-down of the government support program.
Even before COVID-19, British household savings were among the lowest in Europe, with other nations saving two to three times more, but the pandemic has forced many Brits to change their attitude toward savings. Almost half (46%) of 18-34 year olds now say they will save “more carefully” to ensure they have funds to fall back on.
Being without a savings pot is not only a question of practicality either, as it can also affect mental health. A third of men (32%) and over two-fifths of women (41%) admit that achieving greater financial security would make them feel “less anxious or depressed” in their day-to-day life.
Most people surveyed said, to improve their financial resilience, they would like to put more money in cash savings (37%), while others highlighted their desire to reduce debt (25%), and to get onto the property ladder (23%).
The Nest Egg research comes just weeks after similar data revealed that women saved a collective £50bn less than men during the pandemic.
How was the research conducted?
The Nest Egg report was conducted to measure how well Brits can handle financial shocks - such as losing a job - as well as how likely these scenarios are to happen.
Each group was scored out of 100 points across four areas: shock resilience, the probability of an income shock, financial health, and planning for difficulty. The higher the overall score, the stronger the financial safety net.
The four “financial resilience” pillars were calculated using the following data:
- Shock resilience - based on annual household disposable income data and the share of households who could turn to their savings if mortgage payments were to increase for a sustained period.
- Probability of income shocks - based on claimant count relative to population and ratio of private to public sector jobs.
- Financial health - based on house price affordability ratio, rental affordability ratio, average household value of loans outstanding, and average household value of mortgage debt outstanding.
- Planning for difficulty - based on share of households who would turn to family and friends if their mortgage payments were to increase for a sustained period, household propensity to save, and household savings rates.
Regional differences in financial resilience
Yorkshire Building Society’s report found that financial security differs greatly according to region. The East of England proved to be the most financially resilient, scoring 61 out of 100, followed by Scotland with 56, and London with 48. The North East scored the lowest, at just 40, indicating the disproportionate impact the pandemic has had on savers across the country.
UK financial resilience by region
|Rank||2020 Ranking||2020 Index Score|
|1||East of England||61.3|
|11||Yorkshire and the Humber||40.1|
UK financial resilience by city
When broken down by city, Edinburgh ranked as the UK’s most financially resilient community, scoring 64 out of 100, whilst Milton Keynes notched a mere 44. However, the pandemic has knocked the score of several cities off of their usual position. For example, London, which had scored badly from 2014-2019, improved its financial resilience during the pandemic to become the second most resilient city, up from 15th place in 2019.
|Rank||2020 Ranking||2020 Index Score|
How to boost your savings
For tips and advice on how to grow your savings pot, check out our articles "Best cash savings platforms in the UK", "25 money saving tips that could save you thousands", and "7 tips to help you save money if you’re self isolating or working from home".