With all the talk of the nation’s finances creaking (or crashing depending on where you read it) it’s easy to think everyone is mired in debt. This week’s site poll belies that though, with 54% net savers, to 41% net debtors (and 5% in the middle).
Now some may be shocked at this, especially as it’s a MoneySavingExpert.com poll, and many assume our users are primarily in trouble. Actually that’s a common misunderstanding about the site demographics – we tend to closely map the make-up as internet users in general – rather than favour any group. After all some come as they need help, while others enjoy saving money and are good at it, hence having cash.
The poll excludes mortgages
It’s important to note this site poll (view the latest results) did ask people to exclude mortgages and student loans, as I thought it would be a fairer measure of the state of the nation.
Mortgages are a form of investment debt that results in an asset and offsets the necessary cost of housing – though of course there will be some who have a big struggle with covering their mortgage debts. Student loans can’t really be included as you only have to repay it if you’re earning – so it doesn’t hang over you (and currently most shouldn’t try to repay more quickly than they need to – see Should I pay off my student loan?).
Of course, there are people who have both savings and unsecured debts – for a few who are savvy, this is fine if they’re stoozing. Yet for many it’s an absolute waste of cash – what’s the point of having debt on a credit card at 20%, just so you can say you’ve some savings which are only at 3%. Most should simply pay off debt with savings.
However, I think we will re-run this poll without the exclusions in a month or so to see how the two compare.
Far more big savers than big debtors
At the extreme ends the stats are even more polarised. A quarter of respondents have over £25,000 saved (and 8% over £100,000), compared to just 8% with over £25,000 debts (2% over £100,000).
For those with jaws dropping open wondering where on earth all these supersized savers are, I suspect there’s a big age differential going on here. Some older people who are mortgage free, can build savings relatively quickly. Others will have taken the 25% tax-free lump sum from their pension fund and are sitting on that.
In fact, I once heard a note that there are six times more savings accounts in the UK than debt accounts. Though I’ve no idea if it’s substantiated (and of course there are more iterations of savings, e.g. multiple cash ISAs, than debts).
A democratic recession – hitting both savers and debtors
It’s worth noting both groups have been hit by this recession. Of course everyone is affected by rising prices and the necessary squeeze on disposable incomes – though of course the less income you have the more disproportionately hard rising fixed costs like energy, petrol and food hit you.
Also, while lower interest rates should’ve benefited those in debt, the credit crunch means while best-buy rates are lower, lending criteria has tightened like a noose, meaning it’s difficult for many to cut the costs of their existing debts – leaving interest rapidly accruing.
Yet savers too have been hit, with interest rates limboing substantially under the prior two hundred year lows. Worst still, the net effect of high inflation and low interest rates is that many savings are in reality losing’s, as the spending power of the money in them is shrinking (one reason why repaying a mortgage with savings, then finding the top savings deals are so popular).
PS. This blog was written after just over 9,500 poll votes, though the poll is open for a few more hours, so the exact percentages may change slightly.