This report explores the positive short- and long-term impacts that saving can have for people’s wellbeing, and considers what research tells us about how we could encourage more people to start saving. It is based on: a review of evidence on the relationship between saving and wellbeing; and on new analysis of large-scale survey data from a study called Understanding Society.

We find that:

• The majority of evidence points towards a positive relationship between savings and wellbeing – those with savings, and those who save, are generally less anxious about money, and have greater life satisfaction overall. This correlation remains even when accounting for income, although savings behaviour is strongly related to income.
• Our own analysis confirms this relationship, showing that those who save more have higher mental wellbeing scores, were more satisfied with their life overall, were more optimistic about the future, and sleep better at night.
• While the change in mental wellbeing associated with starting or stopping saving is generally fairly small compared with other life events (such as job loss or moving house), the relationship between saving and improved wellbeing persists even when other individual and respondent characteristics are controlled for.
• There is evidence that current regular saving may have a bigger impact on wellbeing for those on lower incomes and for working age adults (rather than older adults).
• Saving appears to improve wellbeing through a number of means:
  • Removing the need to borrow.
  • Preventing hardship by having a pot of money to draw on. 
  • Building financial resilience, as part of a range of positive money management behaviours, to help meet financial goals. 

Evidence points towards a range of ways of encouraging people to save:

• Product design features, tools and incentives, both behavioural and financial, can encourage people to save.
  • Even small financial incentives appear to stimulate saving.
  • Anything that makes it easier to pay money in, and harder to withdraw it is positive.
  • Schemes that are easy to administer and take the money before it goes into the household budget achieve higher levels of success, notably payroll savings.
  • Reminders and texts can also improve engagement with savings,
• Different people will need to use their savings in different ways, so it is important to make sure that accounts are flexible and not prescriptive about the way that they should be used.
• Finally, research cites the importance of “rewarding the behaviour not the balance” – the evidence suggest that the habit and action of saving may be a key part of how it improves wellbeing. Even small amounts can ultimately lead to much bigger impacts.