Uncertain futures and complex economic changes are influencing a rising cost of living. And it’s impacting how people spend. Yet, who are the savvy savers and what does this behavioural change tell us?
UK households are investing their monthly income towards savings rather than non-essential purchases like a new home refurbishment, buying a new wardrobe or eating dinner at a restaurant.
In fact, research undertaken by Vanquis Bank highlighted that 36% of UK individuals choose to save their spare cash after paying for any household bills. On average consumers are now more inclined to save their spare cash over anything else, including spending it on other family members or enjoying a holiday.
The rise towards saving more can relate to the rising cost of living. The nation is experiencing marginal wage growth whilst general prices including food and housing are increasing at a higher rate. With the recent variation of extreme weather, from the ‘Beast from the East’ to the prolonged heatwave, influencing supermarket food prices, it underpins the vulnerability of the price of living and how saving is for many the sensible solution.
Additionally, the uncertainty associated with Brexit is influencing consumer spending, with an already recognisable drop since the referendum. The post-referendum period has resulted in a spike in inflation, affecting the overall state of our economy and in-turn making everyday lives more expensive. The increasing expense attached to modern society is making spending seem even less appealing by squeezing household spending power to the minimum.
In the research, it was also found that the area in the UK where people were most likely to save their spare cash was the South East. This finding can correlate with how people in these areas tend to have higher average incomes, therefore can allow for more money to be put aside in savings. Yet, with the South East also having an averagely higher cost of living it could explain why the region is more conscious about saving their spare income.
Furthermore, the research revealed that the age group most likely to save is the over 55’s. 42% of this age group said that they would choose to save their spare cash. At this age people are more likely to save because they want to plan for their future and retirement.
Saving is taking a bigger role in many people’s lives. Last year the spend on necessary items, such as food, bills and travel, for example, outweighed the spend on non-essentials. Non-essential retail items dropping 2.1% in 12 months, the largest decline in the last five years, is a clear indication of changing consumer behaviour.
Putting more money towards savings means we have less spare cash to enjoy other activities, like eating out at a restaurant with your family. Are we starting to care less about experiencing new things or does planning for the future take precedence?
Why are many choosing not to spend on certain aspects of their lifestyle? Taking cuts on additional spending might mean missing out on new experiences but it reflects a prevailing interest in taking control and having good money management.
In a time of uncertainty, a strong credit score and history is an important consideration. Credit cards allow for the purchase of smaller items to be used to build credit history.
Credit cards are not suitable for long term borrowing or financing existing debt. Missing payments could have severe consequences and make obtaining credit more difficult.