How are soaring living costs affecting people’s savings?

Rising living costs are making it harder for people to put money away in savings – and new research indicates those in “squeezed middle age” are having a particularly tough time.

Nearly two-thirds (62%) of people generally admit to struggling to keep up with savings commitments, a survey of 2,000 adults has found – and a third (33%) say increased cost of living is the main obstacle.

The findings follow recent Bank of England figures indicating households are borrowing more and putting less money into savings. Households deposited £3.2 billion into banks, building societies and NS&I (National Savings and Investments) accounts in December 2021.

This was lower than the amount of money typically deposited pre-pandemic, which averaged £5.5 billion per month in the year to February 2020, according to the Bank of England.

Paragon also found nearly three-quarters (74%) of adults report having financial anxieties about 2022, with inflation the main cause of concern. Other common financial anxieties include the cost of bills increasing (51%), followed by an increase in the cost of goods and services (44%) and general economic uncertainty (23%).

Paragon Bank savings director Derek Sprawling says: “The rising cost of living is impacting us all, and putting pressure on household budgets. Maintaining monthly savings levels or committing towards new savings in this environment can be challenging, but it’s important that people keep focused on their finances and make the most of their money.”

With many accounts paying little or zero interest, it is worth shopping around for a savings deal that can at least offset some of the impact of inflation.

Sprawling adds: “Savers in low paying accounts are missing out on considerable interest, so it’s important for people to look for the best deal.

“Taking the time to search for better-paying accounts can pay off, particularly as savings accounts can grow quickly.”