ONS households’ finances and saving data
interactive investor's Myron Jobson comments on the Office for National Statistics' figures.
22nd July 2024 10:57
by Myron Jobson from interactive investor
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The return of the high interest rate environment following 14 consecutive interest rate hikes, which dragged savings rates out of the post-credit crunch doldrums, is undoubtedly a significant factor behind the reprieve in household savings.
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“It might also be a case of people learning from financial hardships experienced in recent history. The harsh reality of income loss and economic instability during the Covid-19 pandemic served as a stark reminder of the perils of lacking adequate savings. The ensuing cost-of-living crisis has underpinned the need for financial resilience in an unpredictable world.
“However, holding on to extra savings will be a challenge for many. Higher prices still weigh heavily on many households – not least those who haven’t experienced an uptick in income. Homeowners coming off fixed-rate deals are heading for a sharp increase in monthly mortgage payments, which, in many cases, will force them to allocate a larger portion of their earnings towards housing costs, leaving less room for savings and investments.
“As ever, it remains important to maintain a rainy-day fund. Holding three to six months' living expenses in cash is a good rule of thumb. Those with a healthy rainy-day fund and who can afford to put money away for at least five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates.”
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