Everyone knows the importance of saving for a rainy day, and there are plenty of ways to do this in the UK.
We have fixed-rate, instant access, notice, and regular savings accounts, to name a few, and there are also individual savings accounts (ISAs) where any interest you earn is tax-free.
In the UK around £1.5trillion is held in savings accounts, according to the Financial Conduct authority (FCA).
It found that 70% of adults have a savings account and this number has been falling. In this guide we take a look at the UK savings market including the average amount people have saved and how this differs by age.
Why do people save?
There are lots of different reasons to put money into a savings account, and depending on your age and personal circumstances these will vary.
Most people will have several savings accounts, one for each of their savings goals. This could be a savings account for emergencies, which allows you to take out money at any point from and a fixed-term savings account for long-term goals, such as a house deposit, a wedding, or a long holiday.
Whatever account you go for, just keep an eye on the interest rate. If this drops, it’s probably time to move your money into an account with a higher interest rate.
What are the average savings pots by age?
There are lots of different studies on the amount of savings UK adults have. Research from Finder.com suggests the average amount held in savings is £17,773. This varies a lot depending on the age of the person.
Generally older people tend to have larger savings pots. If we look at cash ISAs, for example, the amount of people with an ISA worth £50,000 or more is highest among those aged 65 or over, according to figures from the Office for National Statistics (ONS).
While for people aged under 25, they have the highest number of accounts with between £1 and £2,499 in.
The data from Finder breaks down average savings pots by age, as you can see in the table below:
Average savings by age group
| Age | Average salary | Average savings pot |
| Under 25 | £30,316 | £2,533 |
| 25–34 | £37,544 | £4,775 |
| 35–44 | £40,040 | £6,751 |
| 45–54 | £37,804 | £14,591 |
| 55 and over | £33,852 | £35,607 |
If we look at the data, the fact younger people have less in savings is not a huge surprise. They earn less overall and have had less time to build up a healthy savings pot. While for those in the 30s and 40s, while their income has increased, they are also likely to have higher outgoings such as childcare costs and mortgage payments.
By the time most people get to 55 and older, they may have paid off their mortgage and any children they have are usually not financially independent of them anymore. This means they have more money to put away into savings accounts.
What’s happening with savings rates?
In the last few years the amount of interest on savings accounts has risen significantly. This is because of the Bank of England (BoE) pushing up the base rate. It has been rising consistently, from a low of 0.1% in December 2021, to the current level of 5.25%. The Bank of England decides what level the base rate is, and this is the job of the BoE’s Monetary Policy Committee (MPC).
Over the last few years, it has been trying to control inflation, which has spiralled. As it raised the base rate, this means anyone who owes money, such as mortgage holders, have seen their bills rise. But savers have been able to take advantage of higher interest rates as the majority of savings providers have increased the rates they pay.
How much should you be saving?
There is no definitive guide to the exact amount of money you should be saving, but this will change over time. It’s also a good idea to have a few different savings pots on the go.
The general advice is to save a third of your salary, and to put this money into a savings account where you will earn interest. However, the amount you save will also depend on your life and savings goals.
You could also follow the 50 30 20 budget which has become popular with savers. To do this you divide your salary into three areas each month:
- 50% of your income goes to things you need
- 30% goes towards anything you want
- 20% goes into a savings account
As there are only three sections, this budget is designed to be easy to follow and stick to. However, lots of savings accounts and current accounts now have budgeting and savings tools you may find helpful.
You can usually set up specific pots in your account and move money around when you need to. There are also round-up tools which can help with savings. These usually round up any spending to the nearest £1 and automatically put the extra into a savings account.
Where should you put your savings?
As we’ve already mentioned, the savings market is extensive and there are lots of accounts to choose from. This can be slightly overwhelming when you’re trying to decide where to put your money. Here is a list of some of the accounts you could open:
- Easy-access savings account: these accounts tend to pay the smallest amounts of interest because you can put money in and take it out whenever you like. There are usually no penalties for withdrawing cash and any money in the account will earn interest.
- Fixed-rate savings account: with a fixed savings account, you need to be comfortable putting your money away for a specific amount of time. This could be a year, two years, or anything up to five years, for example. During this time the money earns interest but you will usually not be able to withdraw anything from the account within the fixed-term period. If you do need the money, you may be penalised by losing interest.
- Regular savings account: as the name suggests, regular savings accounts allow you to put away a set amount each month and earn interest on the cash. You usually won’t be able to access the money for the first 12 months.
- Notice savings account: a notice account is a type of fixed-rate savings account but the fix period is a number of days. This can be anything from 30 days to 160 days, for example. During the notice period, you won’t be able to access your cash.
- Current accounts that pay interest: while not strictly a savings account, there are several current accounts that pay interest on in-credit balances. These can be a good way to earn interest on money in your current account.
It’s also worth remembering that cash ISAs are also a very valuable savings tool. There are cash ISAs for most of the accounts mentioned above but the big difference is you don’t pay any tax on the interest you earn. However, you can only put away £20,000 per tax year into an ISA.
What should I be saving towards?
There are lots of things to save towards, and most people have short, medium and long-term savings goals. They could include the following:
| Goal | Time to save | Potential accounts |
| Unexpected things that pop up, such as a failed MOT or broken fridge | Aim to save around three to six months of your usual income | An easy-access account where you can withdraw cash when you need to |
| House deposit or wedding | It may take a few years to reach this goal, depending on how much you’re aiming to save | A fixed-term account earning a good rate of interest |
| Holiday or big purchase | Usually between six months and a year | A short-term fixed-rate account, but make sure you’re able to withdraw the cash when you need it |
| Retirement | This can be a life-long savings project | A Lifetime ISA or a pension |
