Alarming Lack of Savings Could Affect Christmas Sales Spending

By: MoneyFacts

As consumers are getting engulfed by endless sales offers, those without any savings to spare will likely be worrying about how they will afford Christmas, especially if they don’t want to turn to a credit card or overdraft. A report by the FCA published earlier this year found that more people could be in this situation than one might expect, as they found that more than one in 10 adults has no savings at all.

While there’s little that can be done for Christmas this year, other than to curb spending, the latest release from Moneyfacts.co.uk runs through some of the best savings deals that can be opened right now to start up a savings pot for Christmas 2019.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Consumers swept up in the frenzy of Christmas shopping, especially as it’s Cyber Monday, may want to take a step back and see how they are going to afford buying gifts this year, especially if they have managed to store up little to no savings over 2018.

“Earlier this year, the FCA reported that around one in 10 adults has no savings whatsoever (13% of the UK population), which means that many consumers will be covering the cost of Christmas by other means. Relying on short-term finance to cover the cost of the festive spend is not a terrible idea, but it’s important for shoppers to pay off any accumulated balances, to avoid interest charges and so that any debts do not remain hanging overhead in the New Year.

“Those who have felt financially unstable this year may need to take some time out to assess their overall household expenditure and work out whether they could afford to cut back, and how they can build up a savings pot moving forward. There are simple ways to start budgeting, for example by using a free mobile app like Money Dashboard, which can analyse disposable income.

“One way to get into the habit of saving monthly would be to commit to a regular savings account, as these are designed for consumers to make frequent deposits. They are more rigid than easy access accounts and harsh penalties can be applied if payments are missed or withdrawals are made, so they are most suitable for savers who need a strict savings plan and who wish to avoid dipping into their cash early.

“While new customers can earn up to 3.50% on a fixed term regular saver with Saffron Building Society, savers could earn up to 5% on a fixed regular saver if they are prepared to switch their current account to first direct, HSBC, M&S Bank or Nationwide Building Society.

“There are alternatives to regular savers, such as notice accounts for those who have a lump sum to invest, which offer more flexibility but also allow savers to feel safe in the knowledge that they can withdraw their funds by giving some notice. These accounts may be especially desirable for savers expecting higher interest rates next year and who want an opportunity to reinvest their cash, such as in 180 days’ time. If savers are not prepared to lock their money away, they would be wise to consider an easy access account instead; bear in mind that the golden rule of saving towards a goal is to not dip into any pot unless it’s unavoidable.

“If consumers saved just £120 a month for the next year then they would have more cash saved than the average cost of this year’s Christmas spend, which American Express estimates to be £1,206 per person. The determination and commitment to put cash aside should make next Christmas much more affordable – and possibly less stressful – than this one.”

moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, there is no commercial influence on the way moneyfacts.co.uk ranks products, showing consumers a true picture of the best products based on the criteria they select. The site also provides informative guides and covers the latest consumer finance news, as well as offering a weekly newsletter.

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