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Four out of five Brits dip into savings to cope with cost-of-living crisis

Savings 3 min read 14/02/2023
  • Aldermore’s annual Savings Tracker1 found that four out of five UK adults with savings (80%) are dependent on their savings to meet rising living costs
  • UK adults are saving half of what they were last year (£450 vs £885 the year before)
  • A third of UK savers (31%) feel their current financial situation is not sustainable
  • Four in 10 (41%) UK savers feel they are putting enough away – but almost a third (30%) of UK adults saved nothing in the last year

 

Aldermore's latest annual Savings Tracker1, a survey of 4,000 UK adults, has revealed that four out of five people with savings (80%) are depending on their savings to help manage the cost-of-living crisis.

 

Pandemic reserves under threat

Positively, many savers have a healthy rainy day pot put aside (median of £3,000); savings reserves have continued to benefit from the ‘pandemic effect’, when people had less opportunities to go out and splash their cash. The average UK adult had only £1,500 set aside the year before. However, people are now beginning to turn to their savings to meet the cost of bills more frequently. More than a third (35%) of UK adults with savings – equivalent to 14.8m2 people – have had to dip into these savings to make an essential payment within the last month. This has raised concerns that people’s rainy-day funds may not support them longer term if living costs continue to rise. In fact, a third of UK savers (31%) – approximately 11.6m3 people – state their financial situation is not sustainable, whilst nearly half (46%) of UK savers admit to worrying about their financial future.

Three out of 10 UK adults (30%) saved nothing in the last 12 months, an increase from 25% the year before with the majority (58%) of non-savers admitting they’re finding it difficult to put money aside due to the rising cost of essential bills. Despite this, four in ten UK savers (41%) felt they were saving enough.

 

Taking steps to reduce living costs

The cost-of-living crisis is clearly having a major impact on savers, even though many people are going above and beyond to reduce their costs.

More than two out of five (42%) UK adults are shopping less frequently for non-essentials and more than a third (35%) are shopping around different supermarkets in an effort to get the best deal. Nearly four in ten (37%) are socialising less and two in five (19%) have cut down on using their car.

Ewan Edwards, Director of Savings at Aldermore, comments: “The pinch that many people are feeling because of rising living costs is understandable. With inflation running at around 10%, now’s a better time than ever to seek out the best deals available and ensure your cash is working as hard as it can. Our research shows that households are doing their best to put away what they can, despite difficult circumstances, and this should be commended.

“What’s more concerning is that one in ten people who don’t save are doing so because they feel interest rates are poor, when in fact the rates available today are some of the best offered in years.

“We need to see the introduction of a single easy access rate (SEAR), to make it easier for individuals to compare interest rates across the market. Our research shows that seven in ten UK adults (68%) agree that all banks and building societies should be obliged to pay a minimum rate of interest to savers, so this could encourage those who aren’t saving to start.”

 

Aldermore’s top tips for building a savings fund:

  1. Check where your savings are currently being held – Interest rates have increased and you should be looking around for the best rates; the worst thing you can do is earn nothing at all. Compound interest can definitely add up over time so it’s worth investing an hour or two to shop around for the right savings product.
  1. Don’t just put aside loose change, try and save a set amount each month – Rather than only putting aside the money you have left over at the end of the month, try to save a set amount regularly and consistently. Track your savings to ensure you’re sticking to your goals.
  1. Cut down on unnecessary spending – We all deserve a treat now and again, but unnecessary spending habits may be sabotaging your savings. Small changes over time, such as making your own coffee or lunch a few days a week, can add up.
  1. Cancel direct debits which drain your savings potential – Car insurance and gym memberships are two types of payments which are often cheaper if you pay yearly, instead of monthly. While you will need a lump sum to pay in one chunk, you will be able to save money in the long run.
  1. Review your savings habits regularly – If you’re having difficulty meeting your target amount, reduce your monthly contributions to make it more manageable. If you receive a pay rise, a financial gift or find your monthly outgoings are reduced, consider increasing these contributions.

 

**Ends**

 

Notes to editors

1The figures are sourced from a nationally representative survey conducted by Opinium Research with a sample of 4,000 with UK adults from 22nd December and 6th January 2023.

2On a nationally represented survey of 4,000 UK adults aged 18+, 1,119 adults with savings had taken cash out of their savings to pay for something within the last month. 1,119 / 4,000 *52.9m = 14.8m people.

3On a nationally represented survey of 4,000 UK adults aged 18+, 878 savers agree that their current financial situation is not sustainable. 878 / 4,000 * 52.9m = 11.6m people.

 

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