UK adults cite rising cost of living as their biggest money concern

POSTED: 8th March 2022
IN: Newsroom
  • Nearly half of UK adults (47%) say the rising cost of living is concerning, making it the top financial worry for 2022, amid record levels of inflation and energy price hikes
  • Over a third (37%) have not made any plans to mitigate the rise in living costs
  • Two in five (41%) are worried about their financial future with a quarter (27%) saying their current financial situation is not sustainable
  • However, three in ten (30%) UK adults believe the Bank of England’s recent interest rate rises are likely to encourage them to save more over the next 12 months

Aldermore bank’s latest Savings Tracker1, a survey of 4,000 UK adults, reveals that the rising cost of living is currently the UK’s biggest money concern, by a considerable distance over other financial worries. Against a backdrop of soaring inflation, predicted to reach its peak at 8.3% this Spring2, increased mortgage bills and the energy price cap hike, consumers have been hit hard. And yet, over a third of UK adults (37%) haven’t made any plans to mitigate the rise in living costs.

Things aren’t looking up…yet

Overall, the outlook amongst savers hasn’t improved from 2021. Two in five UK adults (41%) are worried about their financial future – the same level as twelve months ago. Moreover, a quarter (27%) say that their current financial situation is not sustainable. Two in five (22%) weren’t able to save last year, with one in three (33%) saying this was due to having no money left after outgoings and bills. Given the current environment, this is likely to get worse, indicating many could struggle with the rising cost of living.  

The anxiety continues

The next biggest money worries were Covid-19 related as one in five (21%) were concerned about their health and 20% mindful of not having adequate emergency funds in case of unexpected expenses. The impact of Brexit on the economy remains on many people’s minds, cited by one in five (20%) as a worry. Although, fears of the Brexit impact have diminished slightly among the UK public as year-on-year it fell from 26% in 2021 to 20% this year. 

Top ten money worries 2022

Percentage citing it as a concern

Rising costs of living

47 %

My health

21 %

Not have enough money for unexpected expenses

20 %

The impact of Brexit on the economy

20 %

Not being able to afford a good quality of life

17 %

Not having enough money for retirement

15 %

A slow economic recovery

15 %

Not being able to pay bills

14 %

Not being able to go on holiday

11 %

Potential of losing my job/wage decreases

8 %

 

What measures are people taking to mitigate the rising cost of living?

Many are taking action to combat rising costs, with many focusing on cutting spending on non-essential or luxury items as the most popular method. Of those who have taken steps to prepare themselves for the increased costs of living, the most common actions are to shop less frequently for non-essentials i.e. clothes and toys (33%), reduce spending on socialising (28%), and shopping in different, lower-cost supermarkets (22%).

Rising inflation actions

 

Shopping less frequently for non-essentials (e.g. clothes, toys)

33 %

Reducing spend on socialising (e.g. dining at restaurants, bars)

28 %

Shop in other supermarkets to save money

22 %

Cutting back on holidays abroad

18 %

Switch energy providers to ensure I am on the best deal

15 %

Cycle/walk to and from places more rather than using a form of transport

11 %

Cancel streaming subscriptions (e.g. Netflix)

10 %

Working from home more instead of commuting

9 %

Use my car less and use public transport more instead

8 %

Move savings into equities and investments

6 %

Use some savings to pay off some of my mortgage

4 %

Switch mortgage providers and lock in a cheaper deal

4 %

N/A – I have not made any plans to mitigate a potential rise in the cost of living

37 %

 

(Lack of) emergency funds

Nearly a quarter of UK adults (23%) say they do not have any funds saved in case of an emergency. And of those who do have an emergency fund, one in three (31%) say it would last them less than a month without an income. This increases to just over half (52%) who say it would last less than three months without any income.

Bank of England rate rise helping savers

Of those who didn’t save anything last year, one in five (20%) said that poor interest rates meant there was little point. However, the good news is that the recent base rate rises may inspire people to build up that emergency fund; nearly a third of UK adults (30%) said rate rises will encourage them to save more in 2022, rising to 45% among 18 to 34 year olds.

However, nearly half (47%) believed it wouldn’t change their savings levels. A generational difference of opinion appeared to emerge, with this figure highest among over 55s at 59% compared to only a quarter (25%) of 18 to 34 year olds, suggesting younger generations will be more motivated to save in a higher rate environment.

Ewan Edwards, head of savings at Aldermore said: “With inflation at a 30 year high, and energy bills predicted to increase by over 50%, more households across the country will be feeling the effects on their disposable income. As the cost of living rises, we’d encourage people to be proactive in planning for it, so they do not feel underprepared. Taking positive action to review personal finances, budget, and save can make all the difference in maintaining long term financial stability.

“It’s concerning that our research shows over half of UK adults do not have enough to last three months without an income, with a quarter having no rainy day fund at all. I’d advise everyone to start growing an emergency fund as it is hugely beneficial in acting as a buffer against unexpected costs and easing the stresses that can come with it. As living costs rise in 2022 and possibly beyond, it’s more vital than ever to nurture good financial health.”

Aldermore’s top tips for budgeting:

  1. Set a savings goal – Whether it’s saving for a holiday, a house deposit, or a special occasion, being clear on what you’re saving for will help motivate you to save rather than spend. It’s important to set a timeframe for when you’re aiming to reach your savings goal. Doing so will help you estimate how much you’ll need to set aside each week or month.
  2. Check where your savings are currently being held – Smaller banks generally offer better savings rates than high street giants, so it is worth shopping around. There is value in getting the best rate possible as the compound interest can really add up over time. Utilising different savings products for your various savings goals can be helpful also. Fixed rate accounts typically offer higher interest rates and can be useful when saving for a bigger expense on the horizon and assist in avoiding temptation to withdraw funds early.
  3. Review your monthly expenses regularly – Take a look at your recent bank statements and familiarise yourself with your spending patterns. Calculate all your outgoing expenses and work out how much of your pay you spend on these items. Next, turn your attention to those unnecessary spending habits which you can drop. Small changes, such as occasionally making your own coffee or lunch a few days a week, will add up over time.
  4. Allocate a budget and stick to it – After identifying your necessary outgoings, allocate a monthly budget to spend on socialising, shopping and other activities. Hold yourself accountable and don’t shy away from reviewing your bank balance regularly. Ahead of every week, keep track of how much you’ve spent so far and adjust your budget for the forthcoming weeks based on this.
  5. Review your savings habits regularly – If you’re having difficulty meeting your savings 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 your contributions to achieve your savings goals sooner. Getting into the routine of regularly saving, even if small amounts, is a positive habit to do and it can be surprising how it adds up over time.
  6. Grow a separate emergency fund – While many tend to save with a particular goal in mind, it is important to also consider the unexpected. By growing a ‘rainy day’ or emergency fund, alongside regular savings, you can gain peace of mind that if unexpected costs or any financial difficulties arise then there are funds to help ease the stress of this and, in the cases of for example damage to a car or urgent repairs needed on a home, you’re able to get back to normality more quickly.  

-ENDS-

Notes to editors:

1Research conducted, on behalf of Aldermore bank, by Opinium between 9 -14 December 2021, with a sample size of 4,000 UK adults ages +18.

2 Resolution Foundation’s Living Standards Outlook for 2022 (released 8 March 2022)

 

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