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Tafari Smith
Head of Savings, RCI Bank
The last recession in 2008 taught many people to set up monetary ‘survival kits’ to safeguard their pocketbooks should financial uncertainty return. Among the new generation of young professionals, many will likely be battling the effects of a recession for the first time.
Last year, because of the pandemic and with limited opportunity to spend, some households managed to build a pot of savings. Looking to the future beyond lockdowns, 49% of UK adults put away more cash intended for big milestones such as a house, car, holidays or planning for a family.
Savings lost
Sadly, as we’re currently plunged into a cost of living crisis and with a recession looming, saving pots have been repurposed for survival. According to RCI Bank’s research: 15% of UK adults have had to use their milestone savings to combat rising inflation, and a further 24% predict they will dip into them in the near future1.
Everyone able should consider creating their own savings survival kits in preparation for the impending recession and beyond. Think of this as a contingency plan which could help you tackle inflation, debt, sudden unemployment and much more.
Good savings habits are about taking small steps, every day.
What does this survival kit include?
- A savvy budget: It is crucial to create a detailed budget — ideally for the week or the pay period — to see your outgoings and track all of your spending.
- Hacks to save early and automatically: Good savings habits are about taking small steps, every day. Set up a small standing order to move money into your savings account once you get paid. At month-end, transfer disposable income from your current account to a savings pot to resist the temptation to spend.
- Easy access savings: Expect emergencies. It’s useful to have money set aside that you can immediately access in the short term. The RCI Bank Freedom account allows unlimited payments and withdrawals, so you can flexibly transfer cash whenever needed.
- Fixed term savings: Invest in your long-term future with notice and fixed term savings. The RCI Bank notice and fixed-term range offers competitive rates, and you can use a ‘laddering strategy’ to improve your yield.
- Employee perks: Check with your HR department to find out if your employer offers any perks that could help lower some of your everyday expenses, including discounted retail vouchers, access to cashback websites or low/no interest loans.
- Asset portfolio: Catalogue any assets you could convert to cash in times of need, including shares or stocks, antiques, jewellery, artwork, cars or property.
- Emergency help: Visit gov.uk and your local council website to find out which programmes, charities or companies can help you lower your childcare, transport or utility costs and improve your financial wellbeing.
When choosing where to put your savings, it is important to ensure the interest rate is guaranteed. Some providers may offer a tempting — but temporary — bonus rate that falls away after a period. Be cautious of limited-access accounts that could penalise you for multiple withdrawals.
Backup plan
Our research shows that in the last year, almost one in seven (13%) savers have knowingly lost out on the interest rate they opened their account with, as they urgently needed access to their savings.
As both inflation and interest rates climb, it’s important to have a contingency plan, preferably with a growing monetary cushion for whatever life throws at you. Do your research thoroughly and pick a product that won’t punish you when life inevitably happens — especially during a time when you may already be struggling financially.