Research published by Ffrees Family Finance this week revealed that two-thirds of people are unable to save money each month. On top of that, seven out of ten worry about their ability to save, leading to widespread fears for their future financial security.
The research results are not totally surprising but the company has a solution. It has launched a new type of current account that it says will help people save. In short, it helps families manage their money through so-called jam jar savings tools.
The way they work is simple. Jam jar accounts allow people to ring-fence money to pay bills, so one account may be for gas and electricity, another for holidays, and so on.
The concept is not new – and, in fact, it is very widespread in America – but it is yet to be used widely in the UK, apart from in credit unions.
The great thing about them is that they help people who are not terribly good at managing money – which is millions of us – see at a glance how healthy our car fund or holiday finances are looking and whether we need to save even more to cover them.
In normal accounts it’s easy to see what looks like a healthy balance and presume there’s enough to cover all outgoings – and not discover a shortfall until we start writing the cheques. Alex Letts, the boss of Ffrees Family Finance, said: “We have reinvented the current account to provide a lower-cost service that helps people save up. We have started with what modern families actually need, instead of being constrained by what ancient systems and ancient history dictate.”
That’s sensible talk which I support. Mr Letts is scathing about so-called challenger banks. “Simply adding more high-street banking competition is actually irrelevant. That is just ‘same old, same old’,” he said.
His view is that the banking model needs reinvention and a new attitude, with the focus switching from how to increase fees and charges, to actually helping people save up and manage their bills.
The new service is going to be the right account for millions of people, and it could clearly help.
However, it’s the principle behind it that I applaud the most. Banking should be about helping people manage their money, not about allowing bankers to help themselves to your money.