Understanding the role of savings in promoting positive wellbeing

A research report from the Personal Finance Research Centre (PFRC), University of Bristol

This report, commissioned by the BSA and sponsored by Yorkshire Building Society, explores the positive short- and long-term impacts that saving can have for people's wellbeing, and considers what research tells us about how we could encourage more people to start saving. It is based on: A review of evidence on the relationship between saving and wellbeing; and on new analysis of large-scale survey data from a study called Understanding Society.

The report finds that:

  • The majority of evidence points towards a positive relationship between savings and wellbeing – most evidence finds that those with savings, and those who save, are generally less anxious about money, and have greater life satisfaction overall. This correlation remains even when accounting for income, although savings behaviour is strongly related to income.

  • Our own analysis confirms this relationship, showing that those who save more have higher mental wellbeing scores, were more satisfied with their life overall, were more optimistic about the future, and sleep better at night – among a range of other positive wellbeing outcomes. For example, while 47% of non-savers were ‘mostly’ or ‘completely’ satisfied with their life, this rises to 63% among those saving £300-399 per month.

  • While the change in mental wellbeing associated with starting or stopping saving is generally fairly small in comparison to other life events (such as job loss or moving house), the relationship between saving and improved wellbeing persists even when other individual and respondent characteristics, such as age, marital status and health, are controlled for.

  • There is evidence that current regular saving may have a bigger impact on wellbeing for those on lower incomes and for working age adults (rather than older adults). For example, we see that just 40% of non- savers in the bottom income quintile were ‘mostly’ or ‘completely’ satisfied with their life overall, rising to 53% among regular savers on the same income. This means that low-income regular savers enjoy similar levels of life satisfaction to non-savers in the fourth income quintile, on much higher incomes.

  • Saving appears to improve wellbeing through a number of means:

    • Removing the need to borrow, e.g. use of high-cost credit or high levels of borrowing. Those who managed to save in as few as two of the six survey years were a third less likely to have debts equivalent to more than 10% of their household income, compared to those who never saved.

    • Preventing hardship by having a pot of money to draw on. While 12% of those who hadn’t saved in the past ten years were behind with their bills in 2021-22, this falls to just 2% among those who managed to save every other year. 

    • Building financial resilience, as part of a range of positive money management behaviours, to help meet financial goals. Saving becomes part of the approach to budgeting, and appears to confer a future-oriented attitude toward money and money goals. Tracking a cohort of young adults since 2011, we find that over three-quarters (82%) of those who regularly saved in five or six of the six survey waves had become homeowners after ten years, compared to just 15% of those who never regularly saved. Even those who managed to save in just one or two waves achieved a 40% homeownership rate after ten years, significantly higher than that for the non-savers.

Read the report

Read the Appendix