Where savers put their cash

Exclusive research by NOP shows that 88 per cent of people aged over 15 have some form of savings, defined in this survey as an account where interest is received on the money deposited. These holdings include not only the traditional savings media – single function deposit accounts without payment facilities – but also the increasingly prevalent, and popular, interest-bearing current accounts, which make the process of acquiring interest more simple. These accounts were pioneered by building societies, and are being promoted by the Halifax, Woolwich and Nationwide; they are now also available from all four clearing banks and from the demutualised societies.

Unsurprisingly, savings holdings are closely related to affluence. ABs – the professional class – have the highest level of holdings at 94 per cent, DEs have the lowest, although more than three-quarters of these, the least prosperous socio-economic group, possess some interest-bearing savings. There is little difference in propensity to save between men and women across the age groups, or the regions, showing that the savings habit is firmly ingrained in the national psyche.

The vast majority of savers – 78 per cent – have savings with more than one institution. Four out of ten have accounts with two sorts of savings providers, one in five with three or more. C2DE savers are the most likely to use only one savings med-ium, and the ABs to have three or more. Multiple use peaks among the 45- to 64-year-old savers, the age group where consumers are most likely to have fewer spending commitments and maximum earnings capacity. Throughout the survey, this age group emerges as the most active and interested in the savings market.

Building society accounts are still the most widespread savings medium, held by nearly two-thirds of savers. Bank savings were owned by 58 per cent of savers; both accounts attract more than twice as many people as the only other significant type of savings institution, the Post Office (which included National Savings).

Building societies are most popular among ABC1 savers, and are used more by people aged over 34; less than half the under-25s save this way. Bank savings extend their appeal into the C2s, and attract nearly two-thirds of under 35-year-old savers, perhaps indicating how the market will develop. National Savings peaks at either end of the age scale, among under 25s and over 55s, and is the only form of savings which appeals equally to all social classes.

Although supermarkets have a tiny franchise compared with the other savings institutions, their four per cent penetration shows they are making good headway. Two-thirds of holders are ABC1, concentrated in the 25 to 45 age group; they also have the highest rate of multiple account holding of any savers.

Reasons for saving

The most widespread reason for saving is “to keep some money by for a rainy day”; 84 per cent of all savers had put money aside for unforeseen misfortune. Two-thirds saw savings as part of prudent money-management – “I keep surplus money where it earns interest”. Forty-two per cent were “saving for a definite event, like a holiday or a large purchase”; a quarter used the interest on savings to supplement their income.

The different motivations for savings peak in different age-groups. “Rainy day savings”, although high across the range, are most prevalent among over 45s. Nine out of ten older savers gave this as a savings rationale, compared with only three-quarters of the under-25s.

Targeted saving is strongest among the young. More than half the under 35s were saving for a particular purpose, falling to a third of 45- to 64-year-olds, and less than a quarter of over 65s. But this group – many of whom are pensioners – accounts for six out of ten of those using interest on their savings to supplement income. Four out of five 45- to 64-year-old savers are earning interest on “surplus money”, another facet of this age group’s use of financial services.

Reasons for choosing provider

Savers’ reasons for choosing a savings provider show the success of relationship marketing compared with mainstream communications media. Nearly half of all savers keep a savings account with an institution where they have another account; the tendency to build a portfolio of products with a single provider is particularly strong among ABs, demonstrating the benefits of cross-selling savings products to an existing customer base.

Recommendation, both personal and professional, is a strong influence in choosing a savings account. Thirty-nine per cent of savers chose the provider on the basis of advice from family or friends; two-thirds of the under-25s, the least experienced savers, followed a personal recommendation. Professional financial recommendation had been taken by 17 per cent of savers – this figure includes branch counter staff or in-house advisers as well as independent professional, and ties in with the high propensity to follow existing suppliers in personal finance.

Fifteen per cent of savers were influenced by press editorial, slightly more than any of the more direct forms of communication: TV ads at 13 per cent, direct mail at 12 per cent and press ads at 11 per cent, have effectively level scores. TV ads influenced a fifth of under-24-year-old savers; press advertising and editorial have twice as much impact on 45- to 64-year-olds, and on ABs as on other age groups or social classes.

Spontaneous ad awareness

Overall, advertising awareness was low. Half the adult population could not name any savings advertising they remembered from the past month, and the rate was no higher among savers than non-savers. This low awareness ties in with the predominance of existing customer association and personal recom- mendation in the choice of savings institutions, and by the relatively slow-moving nature of the market. Advertising awareness is higher among young people, and lowest among the over 65s; DEs – the least likely to be savers – also have the lowest rate of advertising awareness.

More than 25 providers’ advertising was recalled, although only six were named by as many as seven per cent. The Halifax topped the poll, recalled by 13 per cent of adults; it was notably higher among men, ABC1s and 45- to 64-year-olds. This suggests that the recall may be linked to publicity about the forthcoming flotation, rather than account advertising.