Saving is good for mental as well as financial wellbeing

Money matters are the biggest cause of stress for 46% of those who took part in the bank’s research, rising to 58% of those aged 25-34 and 59% in the 35-44 age group.

However, 76% of regular savers say that putting money away makes them less worried about their finances.

The benefits are greatest for younger people, with 86% of 18 to 24 year olds reporting that saving regularly has reduced anxiety and insecurity about their financial situation.

Meanwhile, 64% of 25 to 34 year olds believe that having a savings plan has had a positive impact on their overall mental health, and 68% of all age groups who do not save predict they would feel better if they did so regularly.

Mark Rawcliffe, Lloyds Bank’s head of savings, said: “Getting into the savings habit can not only help your finances, but it can also ease financial worries and reduce stress for many.

“Having savings provides peace of mind that there is a financial buffer for any unexpected costs arising or reassurance of the ability to pay for something if you are saving up for a longer-term goal.

“Putting a small amount away each month in a regular savings account is often a good first step on the path to building your savings pot.”

According to The Money Charity, people are saving more than they did a year ago. On average, between January and March, households put away 4.3% of their after-tax income, compared to 3.2% during the same period in 2017.

However, it is not enough: 36% of UK households have no savings, while a further 13% have a safety net of less than £1,500 to support them if something unforeseen happens.

For many without savings, the only way to cover unexpected expenses such as major domestic or car repairs would be to borrow on plastic or take out a loan, creating a debt that, with the addition of interest payments, could take years to clear.

If the household was hit by job loss, illness or death, with state benefits making up only a fraction of the income shortfall, the result could be long-term debt and even homelessness.

To reduce the chance of suffering this kind of disaster, everyone should have the equivalent of at least three months’ earnings ready in an easily accessible account.

But, while 83% of respondents to the Lloyds survey recognise it is important to save, 61% say one of the reasons for not putting away more is that they cannot spare the cash.

In fact, switching to a cheaper supermarket, buying fewer big brands, cutting back on ready meals, sandwiches and takeaway drinks and limiting the number of days in the week the household drinks alcohol could reduce annual spending by thousands.

Unfortunately, despite the Bank of England raising its base interest rate last November and again in August, savings interest rates remain poor.

The Money Charity puts the average return for instant access accounts at just 0.2%, not including bonus interest, and for tax-free cash Isas at 0.69%.

However, this does not mean it is not worth shopping around via price comparison websites for the best deal, as interest rates vary significantly.

For those able to put away a set amount every month, Santander and Virgin Money have regular saver accounts paying 3% in return for a year-long commitment. Both require a minimum investment of just £1 and allow unlimited withdrawals.

The Santander account, which is available to existing customers and those opening its current account, can be operated online or in branches, and savers may pay in up to £200 a month. The Virgin account must be opened and operated through branches, which can be found in Edinburgh, Glasgow, Dundee and Giffnock, and has a monthly limit of £250.

For those requiring greater flexibility, Coventry Building Society has an online easy-access account that pays 1.4%, including a 0.25% bonus after a year of saving.