Money Mastery Method with Linda Davies

Why Millions Are Quietly Building Emergency Funds

Hidden savings accounts are more common than you might think. A recent survey by Hargreaves Lansdown revealed that one in six people in relationships in the UK maintain a secret stash of savings. While these accounts are often practical or protective, they can also raise questions about financial transparency and trust within relationships.

Why are people keeping secret savings?

1. Emergency preparedness

Financial advisors recommend keeping 3-6 months’ worth of living expenses in savings to cover unexpected events such as job loss or illness. For retirees, the recommendation extends to 3 years of living costs in easy-access funds. Hidden savings can provide a sense of security without involving complex joint financial planning.

2. Financial independence

About 20% of savers with secret accounts admit they don’t trust their partner with money. Maintaining separate savings offers a layer of independence and control, especially in relationships where financial management styles differ.

3. Exit strategies

For some, secret savings act as a contingency plan. Family law solicitors report that around 50% of divorce cases involve hidden savings, typically amounting to £5,000–£10,000. These funds are often used to cover legal fees or fund new living arrangements.

4. Escape from financial abuse

Hidden funds can be lifesaving in abusive relationships. Financial abuse affects an estimated 8.7 million people in the UK, and having secret savings provides a pathway to freedom. In such cases, individuals may also entrust funds to friends or use separate accounts their partner cannot access.

The impact of secret savings on relationships:

While hidden savings offer security, they can also harm relationships. A lack of transparency may lead to feelings of betrayal if discovered, especially if the funds are substantial or tied to mistrust. In one notable case, a man hid £2 million from his family after selling shares, fearing envy and arguments.

Open communication about financial independence and shared goals can help mitigate the risks of secrecy while maintaining trust.

Where to keep your savings:

Choosing the right account is crucial for maximising returns and maintaining access when needed.

• Easy-access savings accounts: Ensure you have instant or easy access funds for emergencies.
• Fixed-rate accounts: For planned expenses, consider a fixed rate account.
• ISAs: Tax-free savings accounts allow up to £20,000 in annual contributions.
• Premium bonds: Tax-free prizes provide an alternative to interest, with payouts ranging from £25 to £1 million.

Be mindful of the personal savings allowance: basic-rate taxpayers can earn up to £1,000 in interest annually without tax, while higher-rate taxpayers are limited to £500.

To sum up:

Secret savings can be a double-edged sword. They offer financial security, independence, and protection in difficult situations but may undermine trust in relationships if kept unnecessarily hidden. For those facing financial or emotional abuse, a secret savings pot may be essential. For others, building financial independence openly with a partner can create stronger foundations for the future.

Start building your emergency fund today, whether open or private as it’s a step toward financial stability and independence.

Secure your wealth. Strengthen your independence.

My downloadable course Happily Married Money offers couples and cohabitants invaluable psychological insights and easily actionable tips on all things money. Click this link: www.lindadavies.com/online-courses for further information.

Sources:

1. Hargreaves Lansdown Survey, 2024
2. FCA Report on Financial Abuse, 2024
3. Trustnet Savings Data, 2024
4. UK Family Law Statistics, 2024
5. Monument Bank Savings Rates, 2024