OPINION: Banks must try harder to solve Britain’s savings crisis

Chris Ridd, Strategy Director at the creative agency EveryFriday, explores how banks can address the lack of savings culture in the UK.

Earlier this year, a study by the Resolution Foundation revealed that people in Britain were the worst in the developed world at saving money, with 750,000 families estimated to have no savings whatsoever.

This is a trend that has continued since the 1980s, and yet, at this time of high inflation and economic uncertainty, the lack of financial resilience has left many families across the country exposed, building up debts and falling behind on bills. Data suggests that six in every 10 households have already spent all their lockdown savings in order to help meet rising costs.

This does not paint a positive picture of the nation’s finances and it’s clear that more needs to be done to shift the dial and encourage a stronger savings culture.

Financial institutions, and in particular the big banks, undoubtedly have an important part to play in all this, and in truth, they need to try a lot harder to make saving money easier for people. Much of that comes down to the way their products and services are communicated.

Simple steps

The banking sector is a crowded market with so many players, all offering a wide range of products, and for the average consumer, the enormous choice on offer only serves to confuse, and in turn put off the decision-making process. For those willing – and able – to research their options, there are hundreds of products out there, all with different rates and different terms of access, which makes the entire process of saving money complicated. The reality is that many people simply don’t know where to start, too often resulting in them doing nothing.

Inertia is the crux of the problem and is what needs to be addressed head-on. Banks need to more clearly articulate the imperative that making a start on saving, however small, is the first step to building more financial resilience and a secure future. It’s about encouraging people to take small, frequent steps, helping them to make that move while removing the complexity of too much choice.

Perhaps it’s about offering less information and less choice but more encouragement. And perhaps it’s highlighting the opportunities and tools to divvy up money into different pots, spurring that emotional feeling that you can have different goals you are working towards, be that the utilities pot, the home renovation pot, or the holiday pot.

From everyday needs to big dreams

Much of the current narrative around savings is based on an assumption that we are all about to do big things and that the money we put aside is for the dreams, the bold ambitions and a better later life. However, banks need to recognise that there are in fact three clear ‘need’ states amongst consumers. Yes, that includes the big dreams, but it’s also important to emphasise the emergency funds and the more pressing needs of day-to-day living – particularly in today’s economic climate – to pay energy bills, to cover car insurance, to feed the family.

That may not be what the money was originally intended for and perhaps it’s an uncomfortable truth, but it’s one that needs to be acknowledged and nurtured.

Empathy and insight

Put simply, it’s about presenting customers with fewer products and clearer advice, and – crucially – communicating these with both empathy and understanding, based on real, tangible customer insight.

With the Consumer Duty coming into force in July, never has it been more important that financial institutions ensure their customers enjoy the best possible financial outcomes. And for so many families across the nation today, that starts with savings.