Saving little and often pays off
Posted on 3rd June 21
Bath Building Society CEO, Kevin Gray, talks about the importance of developing a saving habit from an early age:
I recently attended the Annual Conference of the Building Societies Association which, for the first time ever, was held in a virtual format. After an unprecedented year where societies were challenged on many fronts, the conference had an optimistic tone about it. There are many reasons why building societies have something to cheer about. Property values are increasing and demand for mortgages is strong. Balance sheets have generally grown robustly and pressure on revenue generation has subsided. Societies are held in increasingly high regard by their Members and are ‘punching above their weight’ in competition with the big banks. The general message was that societies had weathered the economic storm of the last 12 months and had proved themselves to be businesses that were willing to aid their Members when they most needed it. I am proud of how our sector responded to the Covid crisis and the supportive initiatives that were been put in place by individual societies. In my opinion, there has been a clear demonstration of the ‘magic of mutuality’.
Not resting on its laurels for one minute, the conference quickly moved on from the successes of 2020 to cover the key challenges now facing the sector. A strong conference theme was the need for societies to successfully invest in digital technologies to transform their business processes and to improve their customer experiences. Another was the importance of successfully embedding the concept of social purpose into strategic planning and the need to better communicate the benefits of our mutual status to current and future Members. There is widespread recognition that building societies must also play a more prominent role in the battle to reduce the carbon emissions from residential premises. I suspect that the challenge of reaching the UK Government’s carbon neutral target will in time require societies to develop creative lending products targeted towards improving the thermal efficiency of the nation’s current housing stock.
One of the biggest immediate challenges facing most societies is the need to recruit younger Members. Bath Building Society (BBS) is quite typical in that its Membership has strong cohorts of children and those aged over 50, with relatively low numbers in the 18-50 age demographic. We at Bath Building Society are determined to do something about this and hence growing the number of Members from the 18-35 age group is now one of our key strategic ambitions. There is some good news which may aid our ambition in this respect. During lockdown, 75% of individuals managed to increase their savings and a significant percentage of those people, when polled, say that they wish to continue keeping their finances in better order on an ongoing basis, including maintaining some form of savings habit. The even better news is that a significant number of people from the 18-35 age group also want to increase their savings and indeed they have started to do something about it. One society at the conference reported that they had opened over 50,000 Lifetime ISA (LISA) accounts over the last 18 months which is a phenomenal achievement. Although Bath Building Society’s operation is not on the scale of that society, we did in fact open a record number of Junior ISA (JISA) accounts this Spring and we have the intention of launching a competitive LISA product early in 2022.
Saving into a LISA or JISA may not be for everyone. Bath Building Society holds the belief that the best way of building a financial nest egg is to save ‘little and often’. To this end we have launched three Regular Saver accounts over the last year, two of which have been specifically aimed at younger savers. The first of these is the 16-25 Regular Saver which permits those between 16 and 25 to save up to £50 per month. The Society currently rewards these young savers with a very competitive interest rate of 4.00% per annum! The second account is our Homestart Regular Saver which is available to those aged 18-34. This account permits savings of up to £250 per month and pays an interest rate of 1.15% per annum. The Homestart account comes with the added benefits of a free arrangement fee and £500 cash back if the saver takes a mortgage with the Society in later years. An individual young saver can open one of each type of account so up to £300 per month can be saved up to the age of 25. There are some local restrictions on the 16-25 Regular Saver account.
The Society is keen to do what it can to encourage young people to join the Society, start building their savings and to progress towards saving deposits for their future homes. If you, or a member of your family, is interested in saving regularly, why not have a look at our Regular Saver accounts or use live chat to talk to one of our colleagues. We may be able to help!