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Here's something for the chancellor to worry about when he presents his Budget later today: the vast majority of British households are less than a month away from serious financial difficulty. Before you accuse me of scaremongering, here are the facts: of the 25 million households in the UK, seven million (28%) have no savings whatsoever. What's more, a further half of all households (12½ million) have less than £1,500 in savings. Hence, only 5½ million households (22%, or two in nine) have savings of more than £1,500. In addition, according to the Bank of England, total take-home pay in the UK in 2005 came to about £834 billion, or roughly £33,400 per household. So, the average household has a post-deductions income of under £2,800 per month. Thus, most households don't even have enough savings to replace a single month's income -- and the lack of a decent cash cushion means that these households are living with one foot on the edge of a financial abyss! Then again, it's worth noting that UK residents have over £556 billion in cash, which comes to over £22,600 per household on average. However, as you've probably guessed, this is very unevenly distributed. In fact, the wealthy and super-rich own the vast majority of this cash pile, leaving the rest of us to share the crumbs from their table! What's even worse is that most British savers are needlessly paying tax on their savings interest. According to new research from the Portman BS, three-quarters of taxpayers are throwing money away by failing to save in tax-free cash mini-ISAs. Portman BS estimates that only a fifth of the UK's 30½ million taxpayers (6.2 million adults) are currently saving into a cash mini-ISA -- a savings account which pays tax-free interest, into which you can save up to £3,000 per tax year. They also estimate that a further 1½ million of us are currently putting money into a shares ISA, which means that less than one in twenty of us invest in shares in a tax-efficient manner. Indeed, Portman BS estimates that, because we're not making full use of cash mini-ISAs, UK savers are gifting over £3½ billion a year to the taxman. Hence, our ignorance is costing us around £140 per year per household in unnecessary savings tax. Oops! In summary, we Brits are absolutely rubbish at saving: most of us don't have an emergency fund to speak of, and three in four taxpayers aren't taking advantage of the simplest tax-free savings account. So, we can't save and, when we do, we end up pouring money down the drain by paying too much tax. In the words of Homer Simpson, "D'oh!" Finally, with just two weeks to go until the end of the 2005/06 tax year on 5 April, isn't it time that you got your savings on the straight and narrow? If you don't claim your £3,000 cash mini-ISA by this date, you lose it. Time is running out, so please don't wait until the last minute to start saving sensibly -- act today! More: Find a cash mini-ISA, shares ISA and high-interest savings account!
