Rainy day savings remain a priority as Brits plan ahead for rising cost of living

The research indicated that saving for a rainy day remains a priority for more than six in ten GB adults, with 61% saying their have money put aside in an emergency fund.

Despite the current climate, nearly four in ten of those with an emergency fund (38%) have been topping it up and saw their balance increase in the last year, while one in four (25%) saw it reduce. Nearly three in ten (29%) said their balance has remained the same.

Cost of living leading cause for savings withdrawals

For those that have needed to dip into their ‘emergency fund’, meeting rising living costs was the leading reason, with 43% naming this as the reason for the withdrawal.

One in five (20%) said they withdrew money to cover an unexpected bill, while 16% said they’d seen their income reduce in the last year so needed to withdraw money to make up the difference. An additional 7% said they had used their emergency fund because they’d lost their income altogether.

Close to one in five (18%) used the funds for a one-off purchase. Just over one in ten people used the money to to book a holiday (11%), while 5% used their emergency fund as a deposit on a house, and 2% said they made a withdrawal to overpay on their mortgage. Six per cent of people used their emergency fund to pay off debts.

The average emergency fund balance stands at more than £7,000

The average emergency fund balance was around £7,606 amongst those that had one. However, one in five (18%) had £1,000 or under in their savings pot.

Perhaps unsurprisingly, younger savers aged between 18 and 24 years old were the most likely to have a balance of £1,000 or less in their emergency fund (27%).

Conversely, 14% of respondents confirmed that they had a balance of £20,000 in their emergency fund, with the over 55s most likely to have a higher balance.

Commenting on the research, Chantelle Perkins, Senior Financial Wellbeing Consultant at HSBC UK, said:

“Adding to an emergency fund is a key part of building financial resilience. While we know this is not always possible, we would encourage savers to put aside enough to cover their monthly outgoings for between three and six months, so that they have a buffer should their circumstances change.

“However, we appreciate how difficult it is to save in the face of rising costs so it’s key for savers to know what resources are available to help manage their money. Budget calculators and features such as our financial fitness score tool can provide valuable support in helping people plan for the future.

“Equally, it’s important for people to make sure their savings are working hard for them, particularly with the backdrop of significantly higher inflation. People who have more in their emergency fund than they’d need to cover six months’ costs should consider how they can maximise returns on their savings, and could consider things like tax efficient savings, like ISAs or possibly investing.”

Five tools available to support customers with the cost of living crisis:

1. Balance after bills: HSBC UK’s Balance After Bills feature gives users an easy way to manage spending and make better financial decisions by simply showing them how much money they have left until payday after regular outgoings. The feature promotes better budgeting by providing insight into available funds from one month to the next and is currently used by around 3 million customers monthly.
2. Subscription management tool: HSBC UK has also launched a subscription management tool (i.e. being able to see and cancel your recurring card payments like on-demand TV subscription services etc) to all customers on mobile. Our customers have cancelled over 200,000 subscriptions during Q1 of this year, around 2,500 a day.
3. Financial Fitness Score Tool: To help people get to grips with their financial fitness, HSBC UK also offers a quick service through our website that can analyse people’s spending, borrowing and savings habits to give them a ‘fitness score.’ The result of this test will signpost to tips and support on ways to improve financial health, with the option of retaking the test at a later date to see an updated score.
4. Educational resources: HSBC UK offers a broad range of educational resources around topics such as budgeting, as well as a budget calculator to help people take control of their spending. There is also additional support and guidance available for those who may be struggling more with their finances through: Money Worries | Support With Your Finances - HSBC UK
5. Support to get into investing: HSBC UK also provides a lot of online resources to help people learn about investing. Through HSBC My Investment, we offer an online investment service available to the bank’s UK customers that allows people to invest with a starting amount of £50 per month, a lump sum of £1,000, or both, after completing a risk tolerance questionnaire.

Media enquiries to:

Leila Taleb, HSBC UK Press Office: Leila.taleb@hsbc.co.uk

For the latest news and updates, visit the HSBC UK newsroom:
https://www.about.hsbc.co.uk/news-and-media