Consumers saving less as rising cost of living forces households to spend more

A statement from the Bank of Ireland said: "The survey results continue to suggest consumers may be trying to save in the face of uncertainty but they are struggling to do so, given the rising cost of living."

Consumers are saving less as soaring inflation and the rising cost of living forces households to spend more.

According to the Bank of Ireland’s savings and investment index, consumers' level of saving fell to 87 in August, down from 90 in May.

Of those surveyed, 29% viewed the cost of living as their biggest concern, up from 22% in May. 

Savings habits have changed considerably since the beginning of the pandemic when the savings index reached a peak. In May 2020, the index for a ‘good time to save’ reached a high of 117, in contrast by August 2022 it had dropped to 92. 

The survey also revealed that while the amount that people are saving has fallen to its lowest level on record, many people are trying to save. 

The index for "do you save" was up six points to 96, however, when asked whether it will be a good time to save in six months, that score dropped to 85, the second lowest level since 2019.

A statement from the Bank of Ireland said: "The survey results continue to suggest consumers may be trying to save in the face of uncertainty but they are struggling to do so, given the rising cost of living."

Meanwhile, many of those surveyed also revealed that they do not feel that they are saving enough, demonstrating the impact of soaring inflation and the back-to-school costs experienced by many households.

Kevin Quinn, chief investment strategist at the Bank of Ireland said: “Rising inflation is having a significant impact on how people view their finances. So much so that despite the challenges presented by Covid and the Russia-Ukraine war, the impact of rising prices is possibly the most significant in the past three years in terms of how people view saving and investing.

As the cost of living takes over as consumers' top concern the war in Ukraine has declined in the list with 17% viewing it as their top worry in August compared to 32% in May. 

Covid has declined significantly with just 3% of those surveyed listing it as their biggest concern. In comparison, climate change, global recession and the cost of housing are all listed as the top concern by a larger number of consumers.