Millions of savers are missing out on top savings rates while others are being overcharged by the taxman amid chaos created by the Governments new rules on savings interest taxation, it has emerged.

On April 6 the Government introduced a new Personal Savings Allowance (PSA) under which 95pc of the population no longer have to pay tax on savings. 

On top of the annual £15,240 Individual Savings Account (Isa) limit, basic-rate taxpayers will be able to earn up to £1,000 from bank accounts tax-free. Higher-rate taxpayers will no longer pay tax on the first £500 they earn from bank accounts.

The policy was in part designed to save higher-rate taxpayers the hassle of filling out self-assessment forms to declare small amounts of savings income, but accountants say it has so far led to wild confusion and inaccuracies in peoples tax codes.

Oh, those millennials. Those entitled young 'uns who can't raise their heads from their digital devices for more than five minutes, who hop from one job to the next with abandon, who are lazy and narcissistic to boot.

And who have managed to top Baby Boomers, Gen X, Gen Y and what have you all in one important category: They have saved more money.

A study by the personal finance website found that 62 percent of millennials (those born between 1986 and 2004) are saving more than 5 percent of their incomes, something only half of people older than 30 can say. While they have started early, however, they're also starting small, compared to other generations: Bankrate found that only 25 percent have earmarked 10 percent of their incomes for savings; those 30 to 49 are saving more than 10 percent.

The Bankrate study came as the Commerce Department reported an increase in February's personal saving rate to 5.4 percent from 5.3 percent in January - its highest level since the end of 2012.

One of the reasons millennials are savers relates to the environment in which they came of age. The Great Recession of 2008 (and beyond) was hugely influential during the formative financial years of many in this generation. The boom years of hot stock and housing markets fostered a consumption mentality among their elders. That's not the case with the millennials, who know full well that markets can go decidedly down, as well. As a result, they're inclined to save.

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Another factor is a heightened awareness of longer lifespans and questions over Social Security's long-term viability. Both factors are leading millennials to save in recognition of their future retirement burden.

While millennials are leading the pack on savings rates, Americans as a whole are saving more of their income as the lessons of the Great Recession remain fresh even eight years later. Bankrate found that 28 percent of Americans overall are socking away more than 10 percent of their income, up from 24 percent.

It's not just high earners who have gotten into the saving habit. Bankrate found that 27 percent of those with incomes between $30,000 and $50,000 save more than 10 percent of their incomes; 24 percent in the $50,000 to $75,000 bracket do so.

The survey also unearthed some worrying news: More than one-fifth of Americans are saving nothing. While the importance of putting money away is understood, wage and salary gains have been modest, making saving difficult for many.

Bankrate noted that the ideal personal savings rate is 15 percent of an individual's income.

The personal savings rate of Americans has continued to hover around a mere 4-5% according to the Economic Research Federal Reserve Bank of St Louis.

This is a disturbingly low number considering many financial advisers recommend saving a minimum of 10% or more! A 5% savings rate means Americans are spending a whopping 95% of their total income.

What’s Your Personal Savings Rate?

Want to know where you stand? Calculate your personal savings rate by first adding up all your income for the month (for our purposes income is defined as after taxes but before voluntary deductions). Then add up everything you DID NOT spend—deposits into savings accounts, retirement accounts, cash on hand.

Divide your unspent funds by your total income and you will have your personal savings rate

Ex.: Monthly Unspent $250 Ã Monthly Income $5000 = 0.05 or 5% Personal Savings Rate

Why it matters

Undersaving will leave you ill prepared for an unexpected financial emergency and your financial future. The issue here is many of us are more willing to say yes to spending more than we say yes to our bank accounts. Consumer spending reached an all-time high of $11330.70 billion in the fourth quarter of 2015  according to US Bureau of Economic Analysis

Ways to say yes to your bank account

Continually saying yes to spending will make your financial goals next to impossible to achieve. To start saving more, the first place to look is in your monthly budget and start saying YES to your bank account in ways listed below.

  • Find a line item in your budget worthy of reduction and add the additional funds to your personal savings. Scrimping to save every penny may not sound as exciting as Sunday brunch, but your future rainy days will thank you.
  • Consider getting a part-time job or sell some of your stuff to increase your income and put the proceeds in your savings.
  • Another great idea is to increase your retirement savings incrementally by 1% every six months.
  • Set up automatic savings and commit to it as if it were a bill.
  • When you get a raise, allocate the full amount toward savings.

In our example above, your total income was $5,000 per month and you had a 5% personal savings rate. If you will now bring home $5,500 a month and you allocate the entire raise to your savings you will have tripled your personal savings rate from 5% to 15% with no change to your current lifestyle.

You can afford that!

Ready to increase your personal savings rate? Which saving strategies will you take on to achieve it?

In the 1950s and '60s, American economic growth democratized prosperity. In the 2010s, we have managed to democratize financial insecurity.

If you ask economists to explain this state of affairs, they are likely to finger credit-card debt as a main culprit. Long before the Great Recession, many say, Americans got themselves into credit trouble. According to an analysis of Federal Reserve and TransUnion data by the personal-finance site ValuePenguin, credit-card debt stood at about $5,700 per household in 2015. Of course, this figure factors in all the households with a balance of zero. About 38 percent of households carried some debt, according to the analysis, and among those, the average was more than $15,000. In recent years, while the number of people holding credit-card debt has been decreasing, the average debt for those households carrying a balance has been on the rise.

Part of the reason credit began to surge in the '80s and '90s is that it was available in a way it had never been available to previous generations. William R. Emmons, an assistant vice president and economist for the Federal Reserve Bank of St. Louis, traces the surge to a 1978 Supreme Court decision, Marquette National Bank of Minneapolis v. First of Omaha Service Corp. The Court ruled that state usury laws, which put limits on credit-card interest, did not apply to nationally chartered banks doing business in those states. That effectively let big national banks issue credit cards everywhere at whatever interest rates they wanted to charge, and it gave the banks a huge incentive to target vulnerable consumers just the way, Emmons believes, vulnerable homeowners were targeted by subprime-mortgage lenders years later. By the mid-'80s, credit debt in America was already soaring. What followed was the so-called Great Moderation, a generation-long period during which recessions were rare and mild, and the risks of carrying all that debt seemed low.

Financial impotence has many of the characteristics of sexual impotence, not least of which is the desperate need to mask it.

Both developments affected savings. With the rise of credit, in particular, many Americans didn't feel as much need to save. And put simply, when debt goes up, savings go down. As Bruce McClary, the vice president of communications for the National Foundation for Credit Counseling, says, "During the initial phase of the Great Recession, there was a spike in credit use because people were using credit in place of emergency savings. They were using credit as a life raft." Not that Americans--or at least those born after World War II--had ever been especially thrifty. The personal savings rate peaked at 13.3 percent in 1971 before falling to 2.6 percent in 2005. As of last year, the figure stood at 5.1 percent, and according to McClary, nearly 30 percent of American adults don't save any of their income for retirement. When you combine high debt with low savings, what you get is a large swath of the population that can't afford a financial emergency.