THE amount of savings held by Scots to tide them over the recession is "worryingly low", according to the first major study into the current state of the nation's personal financial holdings.
Despite a traditional reputation for thriftiness, Scots in all income groups now have almost no "rainy day funds" to fall back on, having allowed their savings to fall to historically low levels and below those built up by savers south of the Border.
The author of the study, savings expert Stewart Ritchie, warns that the lack of savings could have a severe impact if job losses continue in the coming months.
"There is clear evidence that Scottish short-term saving is worryingly low, even in higher income groups, with roughly half of Scots not consciously saving anything on a regular basis," says Ritchie.
"Only a minority of Scottish households seem likely to be holding adequate levels of 'rainy day money', even in comparatively high-income households. This does not bode well for those whose livelihoods are at risk in the current economic recession.
"If they end up losing their jobs, they are going to have very little to fall back on and will face a great deal of hardship."
A report last week found more than half of Scots have had their salary, bonus or working hours cut as a result of the economic downturn with a consequent impact on savings. Financial experts also blamed low interest rates and a crisis of confidence in the banking sector for discouraging saving. Politicians and consumer groups said the danger now was of many more Scots falling into a spiral of debt unless current savings levels could be boosted.
Ritchie is a past president of the Faculty of Actuaries and was awarded the OBE for services to savings and pensions. His report, Scottish Savings: Time For A Homecoming To Thrift And Prudence, was commissioned by Aegon UK, which has more than 4,000 staff in Scotland, as a contribution to the debate about the effects of the recession. It will be submitted to First Minister Alex Salmond and Finance Secretary John Swinney later this week, to help formulate future policy.
It reveals that not only do more than half those individuals earning less than £15,000 – categorised as the lowest income bracket – have no savings, but nearly 20 per cent of those on more than £40,000 are similarly penniless.
Rainy day funds, which every family needs to see them through tough times, are disastrously inadequate, the report says. Standard advice is to have at least three months' salary in the bank, which is £7,000 for those on average earnings.
But the numbers of savers with this in reserve is tiny across most income groups. Among those earning up to £40,000, around three-quarters have less than £3,000 in the bank.
The position is significantly worse in Scotland than the UK as a whole, the report adds. Although the UK average of adults having savings and deposit accounts is 54 per cent, the comparable figure for Scotland falls to 46 per cent.
Similarly, 18 per cent have money with National Savings & Investments across the UK, compared with 11 per cent of Scots. Moreover, 70 per cent of UK adults have some form of long-term investment compared with 63 per cent north of the Border.
Ritchie argues that Scotland needs to return to its traditions of thrift to avoid future heartache.
"There's not much that can be done to stop the pain now, but we can learn the lessons for the future that Scotland must return to the Scottish principles of thrift and canniness to avoid future disasters, " he claims.
He believes the position is compounded by Scotland's reliance on the public sector, which could see big cutbacks after the general election.
"Whichever party wins the next election there are likely to be significant cutbacks in public sector spending, which must mean loss of jobs," he adds.
Labour's economy spokesman in the Scottish Parliament, former finance minister Andy Kerr, last night stressed that people on modest incomes who don't save were at real risk of falling into debt. "The consumer society has bit too hard," he said. "We need to find ways to get people saving again, like the children's accounts set up by the UK government."
Kaliani Lyle, the chief executive of Citizens Advice Scotland, said the recession had eaten away the savings of many people.
"What would concern us about the lack of savings is what will happen to people if they do suddenly face a financial crisis, like losing their job or a sudden emergency? If they don't have the safety net of savings, how will they pay the mortgage, the rent, their bills?
"They would have no option but to take out some kind of loan, and go into debt.
"With interest rates as they are, if you have no money coming in and no savings to pay off your arrears, the debt you take out quickly spirals and becomes unmanageable. People end up taking out one loan to pay off another. And before you know it you are in a crisis that you just can't control."
Bryan Johnston, director of investment managers Brewin Dolphin, said: "The collapse of the banks has rattled ordinary savers. It gave them a fright. They no longer know where to put their money if they want it to be safe and earn a decent return with interest rates so low."
'We feel vulnerable without three months of salary in the bank'ONE family to have already learned how quickly savings disappear when disaster strikes are the Ormistons from Garrowhill in Glasgow. Mark Ormiston and his wife Lorna were brought up to save regularly, and they were very glad they had when Mark was made redundant from a manufacturing company earlier this year.
Mother of two Lorna said: "Saving has always been a top priority for us, but most of the focus has been on the children, saving for their future. We have always made sure we had three months' salary in the bank should anything happen."
However, their "rainy-day" fund is now becoming depleted and Lorna says she is worried in case anything happens to her job, as they no longer have the three-month cushion. A business improvement consultant with BT, she said: "I feel vulnerable without three months of my salary in the bank, particularly now I have a husband and two children to support. I'm not expecting anything to happen to my job, but I don't feel safe without a cushion."
