As this year is the Diamond Jubilee a lot of attention has been paid to how much our lifestyles have changed since the Queen first took to the throne in 1952. And a quick walk around a supermarket could have you feeling like you’ve slipped back in time as the shelves are filled with goods in 1950s-style packaging.
Central to this shift in lifestyle is our finances, despite both periods being times of austerity the amount we save has soared over the last 60 years. So here we take a look at just how our savings habits have changed since the Queen’s coronation.
How much do we save?
A recent study by Lloyds TSB found that since the 1950s households have saved, on average, 6% of their net income.
The 1980s saw the biggest rise in the value of household savings while, perhaps unsurprisingly, the 1970s – a decade of high inflation, unemployment and national strikes – was the worst performing decade, recording a 12% fall.
The archetypal role of the 1950s’ woman was that of a home-maker and, while this has changed over the last 60 years, women are now the biggest savers, putting by the equivalent of 40% of their gross annual earnings. This is almost double the amount men save as a proportion of their earnings.
The average household now has just over £150,000 in savings, including money held in deposit savings, investments and pensions, which is around three times more than what households were saving back in 1951 (taken at today’s prices).
On the downside, one in three households does not have anything at all by way of savings, while another 19% have less than £1,500 set aside, and while it can be hard to just make ends meet, even putting by just a few pounds each month can soon add up to a decent savings pot.
So let’s take a look at the type of accounts on offer to savers in 2012…
ISA
If you are new to savings then an individual savings account (ISA) is a great place to start and any interest you earn will be tax-free.
There is an annual limit on the amount you can put into an ISA and you can invest up to £11,280 before April 5, 2013, all of which can be put into a stocks and shares ISA or you can split the allowance and put as much as £5,640 into a cash ISA.
ISAs are a great savings vehicle as they come with competitive rates and have excellent tax benefits but these will be lost if you withdraw your money early. This means they’re not ideal accounts if you’re saving an emergency fund, for this you’ll need an easy access account.
Easy access savings accounts
An easy access account allows you to get to your money whenever you want and, unlike some other savings accounts, you will not be charged a penalty for making a withdrawal.
The rates on easy access accounts are often not as competitive as on other types of account as the better rates are offered to savers who are prepared to keep their money ‘locked-in’ for a period of time. Also, unlike an ISA, any interest you accrue is subject to taxation.
However, because you can make withdrawals as and when you need to this makes them ideal for an emergency fund as you never quite know when you may need to cover any emergency car repairs or an unexpected bill.
Fixed rate savings accounts
As mentioned above, if you are in a position to lock your money into a savings account and not touch it for a year or more then you will be rewarded with the higher rates of interest.
If you decide upon a fixed rate bond then this will return a guaranteed amount of interest for a set length of time but you will not be allowed any access to your cash during the fixed term. A fixed-rate cash ISA offers the same but with the added tax-benefits associated with an ISA.
The thing to consider when tying your money up for any length of time is that you may lose out in the long run if interest rates do start to go up.
And, whichever type of account you choose, by getting into the savings habit sooner rather than later you stand to make greater returns in the long run.
Article provided by MoneySupermarket, where you can instantly compare rates on a range of savings products.