UK households are being cautioned about the pitfalls of keeping over £5,001 in their bank accounts. Research from Yorkshire Building Society reveals that more than 12 million current accounts yield 1% interest or less. This situation results in substantial missed earnings on savings.
The Importance of Earning Interest on Savings
According to Tina Hughes, director of savings at Yorkshire Building Society, many families are feeling financial strain. Festive spending plans have significantly decreased; households now expect to spend an average of £596 this year, down from £774 in 2024. Individuals planning to spend over £1,000 has plummeted to just 15% from previously over half.
Rising Financial Stress
In a recent survey, 55% of respondents expressed stress regarding their finances. Nearly a quarter, or 24%, indicated they would use credit cards for covering expenses. While 51% of those borrowing expect to clear their holiday debts within three months, another 24% fear it may take up to a year.
Statistics on Idle Funds
Research indicates that around £526 billion is idly sitting in current accounts, generating no interest. This neglect costs consumers approximately £20 billion annually. A staggering one in three individuals have around £5,000 in these accounts, while the average balance stands at £2,067.
- 12 million accounts yield 1% interest or less.
- Average festive spending is down to £596 from £774.
- 55% report financial stress.
- Annual loss due to idle funds is about £20 billion.
Consumer Apathy
A broader issue contributing to these low interest earnings is consumer apathy. Many savers are not actively managing their funds or searching for more lucrative accounts. Around 10% admit they postpone moving funds to higher-interest savings, while 11% lack a specific reason for inaction.
The Potential for Higher Returns
For those willing to explore better savings options, the potential returns can be substantial. For instance, £5,000 in a high-interest easy-access savings account at 4.76% could yield approximately £243 in interest. In contrast, placing the average current account balance of £2,067 in the same account would generate just about £175.56.
Clearly, consumers are missing out on significant growth opportunities by neglecting to transfer their funds into higher-yielding savings accounts. The message is clear: UK households should reconsider the strategy of keeping substantial amounts of money in low-interest current accounts, especially when better options are available.
