Consumers beginning to save for a rainy day, expert says

UK consumers are beginning to realise the importance of putting money in savings in order to protect themselves from potential financial problems in the future, according to one expert in the field.

Commenting on the issue, Hetal Parmar, manager for savings at Alliance and Leicester, said that increasing numbers of people are starting to "set aside money for a rainy day".

He advised: "A good rule of thumb is to have about three months` income saved; so if your car breaks down or if there is a hole in the roof or whatever at least you have got something there to fall back on. I think more and more people are starting to think that way."

Research conducted by Alliance and Leicester suggests that older people are particularly concerned about ensuring they have a sufficiently large financial cushion.

Indeed, 26 per cent of people over the age of 50 recently questioned reported that they were more likely to save now than they were two years ago.

Meanwhile, 35 per cent either have made or said they would be prepared to make sacrifices to ensure that they have enough money for their retirement.

In addition, nearly one-fifth of respondents revealed that they have moved money out of the stock market and into cash savings accounts due to concerns over current economic conditions.

Such people may be right to be concerned about their finances, with figures produced last month by Just Retirement revealing that the amount of debt possessed by pensioners in Britain has risen.

According to the organisation, 24 per cent of people coming up to the age of retirement are currently in debt.

Head of retirement solutions at Just Retirement Nigel Barlow said: "An increasing number of potential retirees - one in four - are unable to rid themselves of their debts, potentially taking them with them forever."

Meanwhile, an expert recently suggested that the likelihood of individuals getting into debt may be increased if they have a lack of mathematical ability.

Richard Marett, chief executive officer of Whizz.com, stated that a combination of not knowing the repercussions of borrowing money at a high rate of interest and not understanding the effects of compound growth can lead to consumers ending up in the red.

He added that some people also bury their heads in the sand when taking out loans or credit and decide that they will worry about the repercussions of borrowing at a later date.