Savings and low-income households

Qualitative research suggests that many of the low-income households who have no formal savings products may have had them in the past and do, in fact, save by other means. This research examined the extent and circumstances under which low-income households save; the purposes for which they save; the mechanisms (both formal and informal) they use to save; and the potential for developing formal savings products to replace some of the informal channels for saving.

Of the 126 low-income households interviewed, about one third did not save any money at all, nor did they put money aside for bills. One in six saved using formal savings products; a half used informal ones and a small number (around one in ten) used both formal and informal ways of saving.

The evidence suggests that people on low incomes:

• want a routine way of regularly setting aside a small sum of money but need a regular savings plan that is flexible at times when they are out of work or have a drop in income and cannot afford to save;
• want to save small sums of money that will mount up into a significant amount over time;
• want easy access to the money when it is needed but otherwise to have restricted access;
• are less concerned about the interest paid on their savings than other considerations; are particularly attracted to saving for children.