Millions of people are missing out on £1,000 a year because their savings are sitting in current and savings accounts earning returns of 1 percent or less.
There are nearly 13m current accounts held in the UK with a balance of over £5,001, with the average held in those accounts standing at £23,600 adding up to a total of £362 billion.
But the poor returns mean many are missing out on interest payments that would be more than enough to cover the cost of Christmas, which is put an average of £774.
The research conducted by Yorkshire Building Society and CACI found that 18 percent of people said they would rely on some form of borrowing to cover the cost of Christmas. And some 36 percent said it would take them at least a year to pay the amount borrowed back.
Many of the respondents stated “cost-of-living pressures” and “not having sufficient funds to cover the costs” as the main reason for relying on credit, prompting the Society to encourage people to find ways to avoid going into the red to cover the cost.
There are nearly 13m current accounts held in the UK with a balance of over £5,001 (Image: Getty)
Chris Irwin, Director of Savings at Yorkshire Building Society, said: “The cost of Christmas, for many, is growing each year.
“We started the year highlighting that keeping large amounts of funds in low-paying current accounts has become a costly mistake for millions.
“Despite the attention savings continue to have, it’s surprising that there continues to be such large pockets of people who are missing out on savings interest, which in turn could have easily covered the cost of the festive period for many.
“For those that don’t have savings that could generate additional income, starting a regular saver now would give shoppers a healthy sum to draw on for Christmas next year – without having to rely on credit.
“We don’t want to tell people how to spend their hard-earned money but covering the cost of Christmas, for many, can be quite daunting and stressful.
“We recognise that many people need help and advice around financial wellbeing, so that they can navigate times when we know people tend to spend more, like the festive season without going into the red. Making some small changes to habits could easily cover the cost of next Christmas.”
Rachel Springall, finance expert at , said: “Consumers debating whether to start a savings pot should act now, it is never too late to overhaul their usual habits and taking just one step can put them back in charge of their financial wellbeing.
“Building an emergency fund or saving for a specific goal is simple and easy to do, so anyone who has struggled to save this year could kick-start the habit for 2025 and rely less on short-term credit to cover the festivities.”
She added: “Savers may find it convenient to stash their cash in their current account, but the stark reality is that these do not work hard enough for them to earn decent interest, nor do they really offer the right structure to instil the savings habit.
“Consumers need to shake any apathy they have and take a step back to decide how their money could work harder for them.”