Our research delves into people’s spending habits during the cost of living crisis, helping us understand the best way to support our customers during the current economic climate. This research follows on from our cost of living survey in 2022, so we ask, what changed in 2023?
This survey involved 2,000 people. We asked a series of questions relating to their spending habits, feelings toward the rising cost of living and how they’ve used their savings.
Here’s what we found out.
What is the cost of living crisis?
The phrase “cost of living” refers to the usual, everyday expenses that a typical household has. Car payments, mortgages, groceries, all of it falls under the cost of living. Due to various economic factors, the crisis was very much present in 2023 – where the cost of living had increased beyond the rate at which households could cope.
How much has the cost of living gone up?
Analysing inflation – which measures the rate at which consumer prices rise – was the best way to determine whether the cost of living had changed. The UK saw a sharp increase in inflation in 2021 and 2022 post pandemic, reaching a peak of 11.1% in October 2022*. A year later, inflation rates decreased by more than half and sat at 4.6% as of October 2023. Despite these improvements, our research put inflation as the third biggest financial concern among households, with 61% saying that’s the case.
Your spending habits
Unsurprisingly, the cost of living crisis had a major impact on both spending and saving habits.
We found just over half of people were cutting their costs and saving with the cost of living in mind, while three quarters of UK households (76%) worried about the cost of living.
Savings
This time, 65% of people said they thought they’d be putting away less – a reduction of 10% compared to 2022.
Almost half had to dip into savings for everyday expenses (46%), while 15% claimed to be saving to cover the cost of everyday items/groceries.
Take a look at our latest savings account rates here.
Christmas
December has always been a big month for retailers, drawing in shoppers to boost sales. However, our research showed that cost-conscious consumers were continuing to curb their spending over the Christmas period.
However, our 2023 data showed that, across all ages of people surveyed, only 16% of people claimed to be saving for Christmas.
Emergency funds
49% of participants were saving for an emergency pot.
22% of people were concerned about rising interest rates, while 61% were concerned about inflation.
Entertainment subscriptions
Interestingly, it appears that at-home entertainment became more of a priority for people in 2023. 32% of people said they reduced their costs on monthly subscriptions, compared to 83% in 2022 – a major 51% difference.
Who is impacted by the cost of living crisis?
No one is immune to the rising cost of living, but we found age played a part in how people were saving and how worried they were about their finances.
Those under 50 years were, on average, more concerned than those over 50, with 41-50 year olds being the most concerned about the rising cost of living (40.7%) – that same age group were the most concerned about rising fuel and electricity tariffs (37.8%). Those over 80 showed the lowest concern (0.7%).
Looking at interest rates and subsequently increased loan repayments, we see that 51-60 year olds were the most concerned (25.8%), while 61-70 year olds showed the least concern (7%).
Where is the cost of living crisis?
The cost of living crisis spans the UK, but we found people living in different places had been affected in different ways. 17.6% of those living in North East England were worried about house prices, leading to that region being the most focused on saving for house deposits (12.8%).
Energy suppliers set different prices for each region, and we found those living in the East Midlands were the most concerned about energy prices. This concern might be what led to 78.4% of households reducing their energy use for financial reasons.
Northern Ireland residents were the least likely to reduce their energy costs for financial reasons, while those living in the South East and the East of England were the most likely to reduce costs for environmental reasons.
Last year’s data
We conducted similar research to this back in October 2022, where our findings painteda slightly different picture, with people more concerned about the UK’s financial future.
Spending habits
Toward the end of 2022, 75% of respondents claimed to be putting less money away, while over half admitted to dipping into their savings for everyday spending.
A third of our respondents claimed to worry about going into debt over Christmas, while only 17% said they were willing to take out a loan to prevent becoming overdrawn.
58% of 2022’s respondents were concerned about rising interest rates and loan repayments, with a further 58% planning to move their savings in order to get the best return.
Most impacted
Overall, 61% were concerned about the performance of the UKs economy. Those under 50 years were significantly more concerned than those over 50, and women were 11% more likely to be worried than men.
When it came to Christmas, 26% of men and 35% of women worried about falling into debt. Those under 50 years were most concerned, and even higher earners on salaries of £60-80k per year were concerned about falling into debt.
Regional differences
Almost 1/3 of those living in London were worried about house prices in 2022, with 22.5% of Londoners saving more for house deposits. North West England residents were more concerned about energy prices, however. That led to a huge 80% of those people being more likely to reduce their energy usage for financial reasons.
Cost of living FAQs
Unfortunately, there’s no real way of predicting how long the cost of living crisis will last.
The good news is that, over the past 12 months, the UK’s economy has started to recover from the downturn it witnessed in 2021-2022. As previously mentioned, inflation has been cut by more than half between 2022 and 2023, and employment rates are steadily growing.
All of this leads to the possibility that the cost of living crisis has already hit its peak, meaning that it’s likely to improve well into 2024 and beyond.
The cost of living is derived from adding up the total costs of everyday essentials. This includes food, utilities, and entertainment. These costs are recorded by local governments in the hopes of tracking changes over time.
Inflation causes the price of things to rise over time. If the inflation rate goes up, so does the cost of every day items. Things like the rising cost of energy, the aftermath of the Covid pandemic, the war in Ukraine and the availability of every day goods are all influencing inflation at the moment.
The cost of living in the UK is rising faster than people’s wages are, add in a strong demand for everyday goods and problems with supply chains, and it causes a cost of living crisis.
There are lots of steps you can take to get through these tough financial times.
Consider reviewing your own finances and start to budgeting for the rising cost of living, you can also work toward saving on your energy bills or start saving for an emergency pot – visit our cost of living blogs page for our top tips on surviving the cost of living crisis.
If you’re a Hodge customer and you’re struggling financially, we’re here to help. Find out more here.
Visit your local Government website to find out if you’re entitled to any financial support.
Our dealing with difficult times hub has information and resources for those who need help with the cost of living, and you can visit our blog for the latest tips on budgeting, saving and more.
If you’re a Hodge customer and you’re struggling financially, we’re here to help. Find out more here.
Visit your local Government website to find out about available financial support and any possible cost of living payments: www.gov.uk/cost-of-living
Beware of scams from fraudsters pretending to be from a Government agency or support scheme – visit our scams and fraud hub for more information on staying safe in the cost of living crisis.
Cost of living help
We're here to support our customers through the cost of living crisis. From top saving tips on social media, to an information hub for those who might be struggling financially, find the information you need using the links below.
Visit our support hub
If you’re struggling financially and want some support, we have a host of information and resources available on our hub.
Find out moreRead our blogs and top tips
Head over to our Facebook page @HodgeBank for a weekly dose of savings tips, or read our blogs on budgeting, savings and more.
Read moreFind further help
Visit our directory of resources and useful numbers below to find the support you need.
Find out moreCost of living blogs
Find tips and resources for surviving the cost of living crisis in our latest articles.
This article is correct at time of publishing and for general information purposes only. Research conducted November 2022 by Hodge.
*Rising cost of living in the UK