Understanding the role of savings in building longer-term financial security

The importance of financial resilience is well-recognised. Whether it’s protecting against life’s unexpected costs or giving a buffer against loss of income, holding some form of cash savings is a crucial form of protection. But how much should households be aiming to save to avoid financial  difficulties?

This research sheds light on this question, building on previous 2014 research from StepChange Debt Charity which found that holding £1,000 in cash savings reduces the odds of perceived problem debt by 44%. We extend this research by using several waves of data from the large-scale Understanding Society survey to track households over the course of a decade (from 2012-13 to 2021-22). 

We explore how the level of savings held by a household in earlier years may affect their later likelihood of three types of financial difficulties: falling behind with bills; high levels of borrowing; and a measure of subjective financial difficulty.