New research reveals who saves, who spends and how we're losing £24 billion through poor savings decisions
Investing has become too complicated according to a poll of UK savers who are missing out on an estimated £24 billion by not investing wisely, according to consumer research commissioned on behalf of the Open University Business School's (OUBS) dedicated research centre, The True Potential Centre for the Public Understanding of Finance (PUFin).
The study shows that 51 per cent of people are put off from investing because of complicated products and processes.
Meanwhile, just like the political parties, we each have our own strategies when it comes to how we budget with any money we have left over at the end of the month.
It was revealed that between them UK adults aged over 16 (52 million people) have over £9 billion worth of spare cash available to them each month (£108 billion per year) – an average of £175 per person, per month. It's what we do with this spare cash that determines how anti or pro-austerity we are at home:
• Saveocrats: 35% are saving regularly into a bank account, but earning little for it
• Investocrats: 8% put their spare cash to work, actively investing it for the future
• Spendocrats: 20% spend all their spare money, with over a third of these borrowing more and living for the moment, they are very much anti-austerity
• Austerocrats: 11% spend less so they can pay off their debts, they are in the pro-austerity camp
• Non-voters: 26% do nothing at all
The research reveals that less than half of us (43%) are regularly saving or investing anything at all, and as a result of not exploring more productive investment options the average UK saver could be missing out on almost £1,500 a year – a total of £24 billion every year across the UK.
These findings are announced as the Open University Business School's True Potential for the Public Understanding of Finance (PUFin) launches an interactive six-week online course to help consumers through the investing maze, completely free of charge. The Managing My Investments course follows the hugely successful Managing My Money course, launched in 2014.
Further findings of the study highlight the misconceptions, confusion and attitudes that surround investing amongst the UK public.
• The mystique of investing is the biggest barrier to potential financial gains with a half of respondents (51%) missing out because they believe it's either too complicated, or too scary. Many of these respondents simply felt that investing was either not for the likes of them, or that you have to be very wealthy or employ a stock broker to even start investing.
• A quarter of those surveyed are put off investing by the risk, with one in three saying they would always take the safest option with their money, limiting their return and putting their future prosperity at risk.
• Whilst three-quarters (76%) of consumers know how to open a cash ISA, we remain largely in the dark when it comes to investing. Less than 40% know how to buy shares, and only 30% could choose an investment.
• Two in every five (44%) said they can't afford to invest. Most people in the UK believe you need upwards of £200 of spare cash every month to be in a position to do so, despite the fact that an ISA can be opened for as little as £1.
• Roughly four out of ten consumers (38%) don't know the main difference between a cash ISA and a savings account at the bank or building society (you don't pay any tax on interest earned in an ISA)
Director of the True Potential Centre for the Public Understanding of Finance (PUFin) at the OUBS, Martin Upton, said:
"It's a real concern that so many people who are able to invest are not doing so because they have preconceptions about investments; be it how much you need monthly to be able to invest or how complicated it is to do so. This simply means there is a huge percentage of the population whose money isn't working to its full potential.
"The new True Potential PUFin Managing My Investments course is a response to UK's limited understanding of investment choices, risks and returns. It will help give consumers the tools to plan properly, make investment choices fit with risk appetites and will also cover the current reforms to UK pensions, changes that will radically alter the way many people will use their pension savings as they move into retirement.
"We feel that financial education has a huge part to play in keeping the nation's financial health on track, our first course highlighted a huge appetite for it, and we look forward to encouraging the next generation of Investocrats."
David Harrison, Managing Partner of True Potential LLP said:
"This research confirms the importance of personal financial education. Many people wish to invest and see their money work harder, but they lack the know-how. Savings and investments are now so complicated and tied up in disclaimers that most are simply put off or are fearful of the potential for loss.
"Unfortunately, efforts to protect consumers from every possible risk, mean we are now in danger of locking them into poor-performing, cash products which will never offer real long-term growth. Greater simplicity and easier access to education and advice are needed urgently.
"Savers are into their seventh year of rock-bottom interest rates so sensible investments have never been more important. At True Potential we believe in giving people the knowledge and technology to make informed investment decisions so that they can reach their financial goals."
The new True Potential PUFin Managing My Investments course begins on Monday 11th May and is available free of charge via the OUBS online social-learning platform, FutureLearn. The course features audio-visual clips, interactive discussions and quizzes offered on a weekly basis. Participants do not need any previous investing experience to join the course, and will need to commit roughly three hours per week to complete it.
In order to participate you must register for the course by Sunday 21 June. To sign up or to find out more information visit www.futurelearn.com/courses/managing-my-investments.