Millions of Britons are choosing to keep their money in cash at home, rather than deposited in a savings account – and it is young people that are driving the trend.
One in eight, 13 per cent, and equivalent to around seven million people, stash at least some of their savings in piggy banks, money jars and biscuit tins at home, according to research from Nottingham Building Society.
Savers keep cash at home for various reasons. Some are worried about bank or cash machine outages, while others like to have cash on hand for making small purchases.
Others will do so to keep their finances private or because they don’t trust the banking system.
These savers will lose out on savings interest, though, which will see the value of their savings eroded over time by inflation.
In large quantities, this could see savers lose a significant amount of purchasing power, leaving them much worse off in the long run.
Under the mattress? Keeping lots of cash at home could see savers lose a significant amount of purchasing power, leaving them much worse off in the long run
In addition, a huge 45 per cent, of people store their savings in a current account rather than a savings account, according to Notting Building Society.
Most current accounts don’t pay any interest – though some do up to a set limit.
Meanwhile, the top easy-access savings accounts currently pay more than 4 per cent.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: ‘While putting coins into a jar can be a good way of stopping yourself from spending loose change – and may feel like a safe option – piggy banks and biscuit tins were never intended as secure homes for hard earned cash.
‘Not only is it very tempting to dip into, rather than leave for a rainy day, but it has no protection, isn’t earning any interest and doesn’t stand a chance against inflation.
‘At a time when every penny counts, it’s vital that savers make their money work harder for them.’
Young people most likely to stash physical cash
Despite the likely assumption that older generations are more likely to keep their cash under the mattress, the figures from Nottingham Building Society indicate that it is actually younger people that are driving the trend.
Some 18 per cent of those aged between 18 and 24 keep their money at home, while 19 per cent of 25-34-year-olds do the same.
This compares to just ten per cent of over 60s.
Young people are being influenced by social media savings trends such as cash stuffing, which involves placing cash in envelopes labelled for different spending categories
Among savers who don’t store their money at home or in current accounts, more than a third, 37 per cent, said they keep their savings in a cash Isa.
Among those over 60, some 47 per cent keep their savings in these accounts.
Savers can put up to £20,000 in a cash Isa each year and they won’t have to pay any tax on the interest.
However, savers who pay the basic rate of income tax can earn up to £1,000 of savings interest tax-free anyway, so depending on how much they have in savings they might not need a tax-free account.
Meanwhile, the Government is trying to encourage people to divert some of their savings into investments instead, to boost the economy.
As part of its investment drive, the Government is considering cutting the cash Isa allowance to just £12,000 in the Budget. A cut to as low as £10,000 has not been ruled out.
Investing often offers better returns than saving in the long term, but comes with risk. Market ups and downs mean people are generally advised against investing any money they will need to access in the next five years.
Adrian Murphy, chief executive of Murphy Wealth, said: ‘Given the UK’s preference for saving in cash, many people will see this as a blow. But it is worth remembering that investing has tended to provide higher returns over the long term.’
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