Saving in the cost of living crisis

Our latest piece of 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 last cost of living survey in 2022, so we ask, what’s changed? And are we feeling different to how we felt over a year ago?

The surveys involve 2,000 people, aged 21-55+ with incomes ranging from £18k to more than £100k. We asked a series of questions relating to their spending habits, feelings toward the rising cost of living and how they’re using their savings.

We found people still aren’t very confident when it comes to managing their finances, they’re struggling to save and they’re looking to cut back on spending where they can. However, things are looking slightly more positive now with less concerns across the board, and early signs of economic recovery.

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 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%). Dining out, luxury goods and grocery shopping continue to see the biggest cuts on spending overall, albeit at roughly 10% less so than 2022.

Christmas

December has always been a big month for retailers, drawing in shoppers to boost sales. However, our research showed cost-conscious consumers were continuing to curb spend over the Christmas period. Our latest data shows that, across all regions, only 16% of people claimed to be saving for Christmas 2023.

Emergency funds

Less people were saving for an emergency, with 49% of participants creating an emergency cost of living savings pot.

52% of people were concerned about rising interest rates and subsequent loan repayments, while 54% plan to move their savings to get the best return.

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.

Take a look at our latest savings account rates here.

Who is impacted by the cost of living crisis?

No one is immune to the rising cost of living, but we found age is playing a part in how people are saving and how worried they are 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 were the least concerned (0.7%).

Looking to interest rates and subsequent increased loan repayments, we see that 51-60 year olds were the most concerned (25.8%), while 61-70 year olds claimed to be the least concerned (7%).

Where is the cost of living crisis?

The cost of living crisis spans the UK, but we found people living in different places have 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’s 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 South East 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.

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