People need to make better use of their savings, a new study suggests.

Research carried out by Alliance & Leicester shows that, in spite of the tax-efficient benefits they offer, only half (51 per cent) of savers have a cash-based individual savings account (Isa). The findings also reveal that six per cent of Britons keep money set aside for use in later life in cash rather than in any form of financial vehicle. Furthermore, 52 per cent of respondents have cash they intend to save lying in a current account.

The financial services firm also reported that there is a lack of awareness regarding such savings products. Some 13 per cent view the savings account as either too complicated to understand or do not know what an Isa is at all. Meanwhile, a third claimed that the savings product is not suitable for them as they do not have a lump sum to put into the savings product. However, Alliance & Leicester pointed out that an Isa product can be opened for as little as 1 pound.

In addition, the research showed that 80 per cent of consumers believe a competitive rate of interest is one of the most important things to look for when taking out a savings account. Some 42 per cent, meanwhile, report that tax efficiency is crucial.

By saving money in a savvy nature it is possible that consumers can manage a number of demands on their finances in later life. Such areas could include personal loans and household repair bills.

Ewan Edwards, head of savings for Alliance & Leicester, stated: “Our survey reveals money matters have a firm place at the forefront of people’s minds at the moment. So much so, that people are now discussing financial related issues more than sport or politics. Nevertheless people still aren’t getting all the benefits they could from their savings, with only half of those with savings getting the extra benefits that come with sheltering their savings in an Isa.”

The financial services expert went on to report that “it’s time for an end to confusion and for people to make the most of whatever they can save - and not be put off by the idea that it’s overly complicated”.

Additionally, the Alliance & Leicester study showed that an increasing number of people are talking about money. One in two Britons state that they have discussed financial matters such as inflation and house prices with family members, friends and work colleagues. In comparison just 40 per cent have talked about recent sporting events, with 26 per cent chatting about celebrities.

Consumers wishing to get to grips with their finances and increase the amount of money they have in savings accounts may wish to consider getting a loan. In taking out a cheap loan borrowers may be able to pay off numerous demands on their spending quickly, leaving them with more disposable income - money which could then be invested into savings schemes. This may be of interest to first-time buyers struggling with their finances. Following the recent report by the Bank of England, David Kuo, head of personal finance for Fool claimed that the document “should set alarms ringing” among consumers. The institution pointed out that credit conditions are set to worsen over the coming months.

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