01.
Introduction
Findings
02.
Attitudes to cash
03.
The gender gap in savings and habits
04.
Average savings and habits by age
05.
Could saver inertia drag the market down?
06.
The cash chasm: why are UK savings standing still?
UK savings top £1.5tn. But while rates remain high, most cash earns less than 2% interest. In partnership with Opinium, Flagstone’s latest research captures the vast gap between the earning potential for this country’s cash, and the static reality.
Friday, 16 February 2024
contents
Methodology
Flagstone developed this report in partnership with Opinium. It details the results from our online survey of 2,000 UK adults, conducted in 2024. The survey sought to understand savings habits and trends across different locations and demographics within the UK, providing insights into national savings behaviours. A representative sample was selected with quotas in place to ensure national representation on age and gender (interlocked), region, and social grade, providing comprehensive insights into these trends.
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Conclusion
07.
This report is not advice. If you would like to receive advice on your cash, consider speaking to a Financial Adviser.
An introduction from Simon Merchant
Interest earnings below inflation
According to The Times’s analysis of Bank of England data, two thirds of the UK savings market (£1tn) earns less interest than its targeted 2% rate of inflation. One quarter (£375bn) earns no interest at all. With rates now 50 times higher than in 2021, savers should be celebrating. Instead, they’re suffering. If you could be earning 5% on your cash, but you’re only earning 2% (or worse, nothing), it’s not just your cash that’s being short-changed. It’s your retirement, your next business venture, your children’s inheritance. Money isn’t everything. But it touches everything.
Confronting the cash chasm
Today, millions of savers are stuck in this interest shortfall – what we’re calling the cash chasm. This report seeks to explore that gap, analysing savers’ behaviour, their motivations, and the challenges they face.
£1tn
Flagstone CEO & Co-Founder
Cash misconceptions overstate risk
Few of our respondents saw cash as a vehicle to grow wealth. Instead, cash was valued for its accessibility. Most people keep a pot of cash for surprises or times of strain, but many also felt their savings were too small to benefit from high interest rates. The public tend to overstate the risks involved with cash saving – 40% of our survey respondents felt that there were still risks, regardless of FSCS protection of up to £85,000 per person, per account.
Gender divide & generational differences
Men are more likely to remember their interest rates than women, regularly check their savings accounts, and switch banks for better rates. Women face unique challenges that shape their attitudes to cash – and wealth in general. The survey results also demonstrate stark differences in the ways that younger and older savers interact with their cash deposits. While younger generations tend to be more open to switching accounts for better rates of interest, their older counterparts are more cautious. Although younger generations are generally less wealthy, they tend to hold more in cash savings.
Findings in brief
Mismatched activity
Our respondents were likely to check on their savings often and make regular contributions. But that rarely involved seeking out higher rates. Cash is valued for what it offers today – rarely for what it could become tomorrow.
Wealth is no guarantee
Even the wealthiest aren’t immune to inertia. Almost one in three savers with over £100,000 in cash hadn’t moved their cash in the past 12 months. As this report will show, saver inertia is prevalent in every sub-section of our society – even among those who stand to gain the most from high interest accounts.
40%
Checking not changing: exploring savers’ attitudes & habits
Savers clearly care about the health of their cash
We found that more than half of savers (54%) checked their savings account balance at least once a month. Meanwhile, 90% contribute to their savings accounts either monthly (46%) or every few months (16%). This clearly paints a picture of a population that cares about their cash. But surprises arise when we explore why people are checking their cash deposits.
Cash as contingency
It seems that cash savings aren’t seen as a tool for wealth creation, unlike stocks or bonds. Over one in three people felt that they couldn’t make money out of their savings at all. Furthermore, 40% of those surveyed said it ‘just doesn’t occur to them’ to switch accounts for higher rates. 68% switch no more than once a year.
For many, cash isn’t an asset. It’s a contingency, for falling back on when times get tough. Over three quarters of savers said they like to keep cash within easy reach, rising to 85% for retirees. And 55% keep at least three months of outgoings in savings at any one time. Saving is a positive habit. But, with interest rates now 50 times higher than in 2021, this passive view of cash risks stalling the earning potential of millions of UK savers.
Only 34% recall how much interest they’ve earned in the past year
Only 47% remember their interest rates
40% don’t check their interest rate more than once per year
Knowledge gaps & finding time
If conventional wisdom assumes that cash is a safety net, then the next question must be: what drives that perception? Do savers know how much they can earn from switching their accounts? A significant portion don’t. Almost one third of respondents (32%) said they lack sufficient knowledge to explore the savings market and make good personal savings decisions – despite the increasing availability of tools, platforms, and sites like MoneySavingExpert. But knowledge isn’t the only missing piece. Whilst other savers understood the value of scouring the market for better rates, they felt they needed more hours in the day to do it. Over one quarter of respondents said they 'don’t have time' to do such research.
Wealth creates wealth?
Some respondents were open to the idea that cash could create wealth, in theory. They just felt it couldn’t do so for them. Over one third of respondents said they don’t have enough cash to warrant looking around for better interest rates. Additionally, over half of respondents believed that higher savings totals led to more competitive rates. This suggests that a significant proportion of the UK public believe cash is a viable asset to grow wealth, but only for the richest. Wealthy savers seem to agree. Respondents earning over £100,000 per year were more likely to believe that the more they save, the more access they would have to competitive rates (65%) compared to those earning up to £20,000 (48%). That said, there are those amongst the UK’s highest earners who seem to see no value in actively managing their cash. Over one quarter of households earning £100,000 or more have just one savings account or none at all. Further, almost one in three savers with over £100,000 in cash hadn’t moved it into a new savings account with a different bank in the past 12 months. It’s clear from the data that inertia impacts savers in every income bracket.
Simon’s view
In a high interest environment, where rates exceed inflation, cash has the power to create wealth for everyone. But too few of us are taking advantage of this opportunity. That needs to change, and it’s not just the saver’s responsibility. Banks should make the best rates easy to find, whether that’s on their websites or third-party platforms like MoneySavingExpert. Businesses like Flagstone also have a role to play in expanding the public’s understanding of how they can build their wealth through cash. It’s great news that so many savers hold sufficient cash for rainy days. Now we need to go beyond that to demonstrate how people can grow their spending power – not watch the value of their deposits erode in uncompetitive accounts.
48%
65%
Respondents earning over £100,000 per year
Respondents earning below £20,000 per year
Perceived likelihood of accessing competitive rates
Simon Merchant Flagstone CEO & Co-Founder
Mind the gap: how gender shapes our savings habits
While the UK population generally struggles to take advantage of maximising interest on savings, the phenomenon is more pronounced in women than men. Men are more likely to keep track of their interest rates (54% for men compared to 40% for women). Furthermore, according to an FCA (Financial Conduct Authority) study, more women (21%) report a lack of confidence in managing their finances than men (12%).
Number of savings accounts & amounts
Men are marginally more likely than women to have multiple accounts (52% vs. 47%). They’re also twice as likely to have substantial savings that could earn significant interest.
Interest rate recall rift
Male respondents to our survey were more confident recalling their interest rates from memory, (54%, compared to 40% of women). This suggests that men tend to be more bullish about the specifics of their savings.
Passive patterns in cash savings
Nearly half of women (45%) admit they don’t check their cash interest rates more than once a year, compared to 35% of men. The same pattern is observable when switching accounts for better rates. 71% of women generally stick with their savings accounts, opting not to switch more than once a year. By contrast, only 63% of men stuck with the same savings account. Even more telling is the fact that 37% of women have never adjusted their savings plans to reach financial goals or weather market conditions, compared to 27% of men. The results point to a higher tendency for women to be passive in their savings management relative to men. Consequently, women are more likely to lose out on interest earnings than men, potentially compounding financial inequalities such as the gender pay gap.
10% of men have more than £100,000 in savings, compared to 5% of women.
21% of men have £50,001 or more in savings, compared to 12% of women.
56% of men have £5,001 or more in savings, compared to 44% of women.
Percentage
Financial empowerment strategies for women
read more
Why you should open multiple savings accounts
The generational savings shift
Savings habits vary across generations. Millennials and Gen Z have benefited from a fintech-driven push to improve financial awareness, which appears to have an impact on how they view cash and savings. A majority of younger respondents, aged 18-34, knew their interest rate (57%). They reported tracking interest rates regularly and adjusting strategies to secure higher returns. By contrast, older people (aged 55+) are more passive. They tend to make fewer changes to their savings accounts based on market conditions.
Younger savers demonstrate greater recall
Only 40% of older savers remember their interest rates. This is 17% less than the figure reported by younger people. Similarly, just 24% of older people remember how much interest they earned in the past year, compared to 49% of younger savers. Despite this, younger people are less likely to view savings as a way to build wealth, with 42% stating they don’t think about savings in this way, compared to 32% of older savers. The higher awareness likely reflects their use of technology and fintech tools, which make tracking savings easier, rather than a heightened focus on earning more from their savings.
Savings management: a generational contrast
Older people were more reluctant to switch accounts for a better rate. 78% of older account holders avoided switching, compared to 49% of young savers. People over 55 were also much more likely to stick with their savings plans, regardless of their financial goals or changing market conditions. While 42% of older people reported that they would stay the course despite those factors, only 13% of younger people claimed they would do the same. The findings show a stark difference in attitudes towards savings between younger and older generations. Generally, younger savers are willing to act when it comes to their savings. They are more likely to take advantage of higher interest rates, whilst older generations are less engaged with their cash. This is perhaps unsurprising, given that younger people tend to hold a higher proportion of their wealth in savings. 61% of young people try to always keep at least three months' worth of their outgoings in a savings account. 58% of older people also reported aiming to hold three months’ worth of outgoings in savings. But, as they tend to have a more robust financial portfolio, this represents a smaller proportion of their overall wealth.
Green shoots: young people want to earn but doubt potential
There are notable differences in savings attitudes between generations.
"I don’t think about savings as something to make money from."
Younger people (aged 18-34)
"My savings are too small to bother earning interest on them."
47%
Older people (aged 55+)
23%
42%
32%
"It doesn’t occur to me to monitor and switch accounts often."
34%
"I don’t have time to research and set up better accounts."
"I don’t know enough about the savings market to make good decisions."
45%
22%
36%
18%
Despite their challenges, younger people demonstrate awareness of the opportunity to grow their cash savings. 70% of younger people consider savings an essential part of managing their personal finances. Moreover, 62% said they could earn better interest by being more proactive, compared to 43% of older people. The reasons for holding cash are also insightful. 84% of older respondents kept cash in savings so it’s easily accessible when needed. This figure was 13% less in younger people (71%), which suggests that younger generations are more open to viewing cash as a means to reaching a goal, rather than a contingency.
Younger people are over three times likelier (38%) to regularly check and manage their savings to reach financial milestones, compared to just 12% of older people.
Consequently, the younger generation are nearly twice as likely (33%) to say they’ve achieved or made strides towards their savings goal, compared to their older counterparts (18%). Younger people are twice as likely (52%) to take on higher risk for potentially greater returns, compared to 26% of older people. Given that 40% of all survey respondents felt cash deposits held risk even with FSCS protection, this may explain why younger people are open to exploring various savings options, including cash savings.
What would encourage people to save more?
Better rates on savings accounts in general
More incentives and rewards from bank(s) to save with them
Better rates on instant access accounts
Better understanding of how best to manage personal finances
Greater confidence in ability to make the right savings decisions
Easier processes to find, compare, and then open the accounts with the best rates
Younger people demonstrate promising savings habits, despite challenges. They often feel constrained by limited funds, but they also hold a higher level of their wealth in cash. This means younger savers are uniquely placed to avoid the cash chasm that older generations face.
18-34
35-54
55+
Age range
The savings landscape has evolved significantly over the last decade. Younger people today are leveraging digital tools and showing a proactive approach to financial management that wasn't as prevalent in the past. Their willingness to take calculated risks and focus on strategic goals indicates a strong foundation for long-term financial health. But there's a clear need for even better financial education to support this generation as they build robust savings habits.
Growing and safeguarding your savings - a guide
Which savings account is right for me?
Imbedded financial habits among younger savers
At first glance, it appears that there are promising signs of diversification across the cash market. But, a closer look at the data exposes the much more precarious state of the UK public’s savings.
69%
43%
65% of savers hold over £1,000 in cash savings.
69% have savings accounts across two to five banks.
43% have two to five savings accounts.
Despite these figures, 25% of savers with multiple accounts keep them with one bank. Nearly three in five (58%) keep most savings with the same bank where they have their current account. These savers are more at risk, as they don’t benefit from additional FSCS protection beyond £85,000 should their bank go bankrupt. It’s also unlikely they will enjoy competitive savings rates, as high street banks rarely offer incentives to promote consumer loyalty. The ‘big five’ banks administer over 85% of the current account market in the UK. Additionally, the lack of movement in cash savings demonstrates that more can be done to raise awareness and ensure UK savers don’t miss out on earnings. This is especially critical as the ongoing cost of living crisis continues to bite.
More than 3 in 5 households haven’t moved a portion of savings to a different bank in the last 12 months. This is true across income brackets:
30%
50%
60%
63%
75%
30% of households with over £100,000
50% of households with £80,001-£100,000
60% of households with £60,001-£80,000
63% of households with £40,001-60,000
65% of households with £20,001-£60,000
75% of households with less than £20,000
Even movement within the same bank is limited. 57% of savers haven't transferred funds into a new account held at their bank in the past year. Half of savers (49%) haven't transferred savings between their existing accounts held within the same bank in the past year. This means that even if rates became more competitive, unless they were applied to open accounts, the cash chasm would continue to erode the value of savers’ contingency assets. Unless, that is, UK savers become more proactive in managing their cash.
The impact of inertia on bank rates
Our research uncovers profound inertia among savers. A substantial proportion of people don’t transfer their savings to preferable accounts. Banks aren’t really at fault here. Since so many savers leave their money in the same bank without searching for better rates, banks may feel less pressure to offer competitive options. As interest rates keep dropping, this lack of customer movement could give banks even less reason to provide attractive savings options, creating a cycle where both savers and banks remain inactive. This could lead to a stagnant savings market.
25%
57% of savers haven't transferred funds into a new account held at their bank in the past year.
Closing the UK cash chasm: a way forward for savers
In the UK cash savings market, behaviours vary, with few cohorts more disposed to experimentation than young people. But there's potential for other demographics to improve their position and start treating savings as an asset class. Our research findings need to be considered through the lens of the current economic climate. Many, including higher earners, often find themselves with little left to save at the end of each month. The average member of the public in the UK has thousands of pounds saved across multiple accounts, yet they seldom transfer funds or seek better rates. This results in less favourable returns on deposits that struggle to beat inflation, if the cash earns any interest at all. For their part, banks have met requirements to offer better rates and easy account switching. But half of UK adults simply don't move their savings. Economics works best when supply and demand are balanced. So how do we guarantee that banks remain incentivised to offer competitive rates, particularly as interest rates decline?
The answer is that savers need to act now. The current environment remains unusually favourable at the time of writing, with inflation close to 2% and some interest rates for savings accounts hovering around 5%. Savers can still secure returns that outpace inflation. But with Bank of England rate cuts on the horizon, this is unlikely to last. Platforms that make it easier than ever to compare, contrast, and open accounts at scale are the best hope for UK savers to bridge the cash chasm and safeguard their savings. Flagstone’s cash deposit platform helps you manage and grow your savings. Our platform gives you access to a wide range of accounts with competitive rates from 60+ banks. Use one login to view, assess, and measure your earnings, without the hassle of constantly searching for better rates.
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