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Financial security and wellbeing - the importance of building a savings habit

BSA Chief Executive, Robin Fieth, explores the relationships between a savings habit, resilience, wellbeing and productivity.  

BSA Chief Executive, Robin Fieth, explores the relationships between a savings habit, resilience, wellbeing and productivity. 

Not widely reported at the time, but for me one of the sadnesses of the post financial crisis period was the closure (and solvent  wind-down) of Airdrie Savings Bank, the last of a proud line of UK savings banks that started a little way further south (but still in Scotland) with the establishment of the Ruthwell Savings Bank in 1810.

The local minister in Ruthwell, Rev Henry Duncan, is said to  have been deeply concerned by the dire poverty of his  parishioners and “aimed to encourage saving among the  labouring classes to keep them from the degradation of poor  relief ”¹. Not so different in some ways from the tradition of building societies that started in  Birmingham some 35 years earlier.

Winding forward to 2017, research by Toynbee Hall found that²  "small sum savings can help individuals to develop greater financial resilience”. Their question was  whether “formulating a savings behaviour through informal or small sum savings is any more useful than just simply having a pot of money towards improving financial resilience”. And the research found that “having such a savings behaviour can assist not only in an individual’s having a precautionary sum of money, but also in knowing how best to deal with difficult financial situations”.

With that we have the answer to the chicken and egg question that is sometimes raised about whether  savings should come first, or whether financial education is a prerequisite: both at the same time!

The same report found that whilst 24% of households had no savings whatsoever (a number that does  not seem to have improved much in the interim), about 20% of those in the bottom decile of income  distribution did manage to save something. And that those savings were something of a status symbol –“many low income savers are motivated to save because having savings is a positive thing in itself".

Clear links then, between establishing savings habits, financial resilience and wellbeing. Links that were taken a step further by Yorkshire Building Society in its 2019 report on Using the Workplace to Get Britain Saving³ – making the connection between financial resilience, well-being and workplace productivity.

If ever there was a virtuous circle, this relationship between a savings habit, resilience, wellbeing and productivity seems to be an obvious one. But it is also one that many have tried to foster without  achieving a real breakthrough. Here we have a potential meeting of individual, corporate and national interest; and that is why in the Mutuals Prospectus, we are calling for a future government to require major employers to offer workplace savings schemes through payroll deduction. Our credit union  members (and some of our building society members too) have demonstrated how effective regular payroll savings can be – so let’s work together to make it happen at scale.

¹ www.natwestgroup.com/heritage/companies/ruthwell-savings-bank.html
² Toynbee Hall (2017) Savings for the Future: Solving the Savings Puzzle for Low Income Households
³ Yorkshire Building Society (2019) Using the Workplace to Get Britain Saving: being ambitious about saving

This article was first published in Society Matters \magazine