What is the impact of savings on mental health?
Having savings might feel like an unobtainable goal for many, especially when following a strict budget during the cost-of-living crisis. However, even having a small safety net is obtainable with planning. Not only can it help you meet purchase goals over time, it can be a great benefit to our mental health and sense of security. In this blog, we’ll talk about the mental health benefits of having savings, including some advice on how to start.
How common is it to have savings?
It might surprise you to learn that half of people living with a mental health problem have less than £100 in savings, while over a third don’t have any savings. This comes from research conducted in 2022 by the Money and Pensions Service. The research also found that 90% of people living with a mental health problem avoid talking about their finances.
Lloyds Bank Savings Report (2018) highlighted that 74% of consistent savers said they were happy, compared to just 36% of non-savers. 53% agreed that having a savings plan had a positive impact on their psychological state.
Whilst some might feel ashamed or have a sense of failure from not having savings, it’s important to remember that many people will be struggling to start or maintain saving money, especially during the cost-of-living crisis.
What are the mental health benefits of having savings?
There are numerous mental health benefits of having savings. Remember that money worries also affect mental health, so having savings can be a direct benefit to our mental health. in a number of ways. Also, when you start saving, it’s important to try and keep these benefits in mind to give perspective on what you’re working toward and to maintain motivation. Some of these include:
- Financial stability: Having savings to fall back on can help alleviate worries around unexpected payments, such as medical and vet bills, car maintenance, or the unfortunate circumstance of losing a job. When you have a savings safety net, you have the relief of knowing that should the unexpected happen, you’ll be able to afford it. This can also help relieve financial anxiety. Some people recommend seeing savings as a “rainy day fund,” “solution funds,” or “stress relief funds” if they are specifically for emergencies. You can even begin to split your savings up, with a portion set aside in a different account for emergencies, and a portion for goals such as holidays or purchases.
- Choice and control: When faced with the unexpected it can be empowering to know that you could afford something if needed. Having a sense of control when facing uncertainty can be motivational as opposed to feeling that you have no power over something because you don’t have the money to afford an option.
- Reduce negative habits: Having savings, especially if they are in certain types of bank accounts such as fixed term accounts, can help reduce negative spending habits such as overspending. This is especially true if you experience problem gambling.
- Attaining goals: Having savings makes it easier to reach goals you might not otherwise achieve. Even if you don’t have firm goals such as purchasing a car or house, going on holiday, or anything else, starting to save now can make reaching those goals easier when they come up.
- Building healthy habits and self-esteem: Building healthy habits has been found to help build overall self-esteem, which can help reduce anxiety and negative self-talk.
What is the best way to start keeping savings?
If you are hoping to start saving money, it’s understandable that you might feel overwhelmed. Here are some tips and advice for getting started:
- You can begin by using our free budget calculator by our friends at MoneyPlanner to calculate your budget for covering bills, etc.
- Our savings calculator is another useful tool that can help you work out how long it might take to reach your savings goal, or how much you need to save to reach your goal by a certain date.
- Many banks offer savings accounts purpose-built for saving money. Not only do they offer interest, but some - such as Fixed Term Accounts - make it difficult to withdraw money until a certain amount of time passes.
- If you might need to access savings in an emergency, easy-access savings accounts allow you to withdraw money at short notice. These are also useful for saving in the short term, such as to reach a goal by the end of the year. Although interest rates tend to be low on these accounts.
- For a full list of types of savings accounts along with the pros and cons for each, MoneySuperMarket has a great webpage for choosing the right savings account for your needs.
- Remember to factor in rewards for hitting targets. For example, you might treat yourself to something small when you reach a certain milestone. That way, it keeps the sense of achievement tangible while still maintaining your savings momentum.
We hope that these tips help you to start saving money and achieve your goals, whether they are to go on holiday, make a purchase, or simply save for emergencies and the future.
One final tip to remember: some government benefits are affected by having savings. While Personal Independence Payment is not affected by having savings, it can affect others or affect how much you have to pay for residential care.
If you receive benefits, ask your advisor what the savings threshold is for that specific allowance or benefit.
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