As with physical health, prevention is better than cure when it comes to financial wellbeing.
The definition of financial wellbeing can be considered in 4 main areas:
- The ability to fund day to day living
- Having enough to cover unexpected expenses
- You are on track to achieve your financial goals
- You have the financial freedom to live the life you choose
The second bullet point addresses the need to have some savings in case of financial emergency, eg the car fails its MOT and needs 2 new tyres or the boiler breaks etc.
The last 2 bullet points are about longer term planning and if there are no savings then it's highly unlikely for the majority of people to be able to achieve their financial goals, live the life they want and cover unexpected expenses just from their current income alone.
Even saving a little regularly can build over time into something much larger with the added bonus of compounding and especially if the savings are in a tax free environment and if they are moved into a good performing savings account regularly.
It is good practice to review savings accounts regularly, especially if there are bonuses attached to the account and these have an expiry date.
Just looking at moneyfacts.com today, the rates that can be found with only a cursory look for instant access range from 0% to 5% interest, subject to varying conditions.
Many companies have some very beneficial savings options in the form of share schemes and pensions.
And when LISAs are introduced in April 2017, this is another form of savings where the government adds 25% onto the amount you save, again subject to conditions.
Saving should be a habit that is encouraged at the earliest possible opportunity and at every stage throughout life - saving £50 per month for 10 years at an average interest of 2% could build a savings pot of £6,630.
Having some savings to rely on when there is a financial emergency, to tide you through a gap in employment, to save for a deposit on a house or to add to pensions for retirement plans provides peace of mind and a security buffer and the sooner you start the better.
Young families are leaving themselves in a financially fragile state, academics say, amid reports that people are losing the savings habit. Failure to put money aside exposed them to expensive debts, according to John Ashton, a professor in banking.