Increase in cost of living takes its toll as one in six Brits take out debt

• Two in three Brits who are worrying about their personal finances report that this is impacting their sleep or other wellbeing issues as the cost of living crisis gains momentum

• 1 in 3 of those who were saving for a home deposit have stopped or decreased the amount they were saving in response to the rising costs of living

• Nearly half (49%) of those taking more money out of savings or investments than they put in over the past 6 months, are using these funds to cover increased day-to-day living costs, with many others turning to debt to get by

According to the survey of over 5,800 participants, 83% have worries about their personal finances right now and, as a result of living cost increases, some are expecting to save less towards their goals or not at all, and planned spending is being cancelled or delayed:

• Of those cutting back on large expenditures in the previous / next six months due to the increase in cost of living, 44% will go without a holiday this year, while 35% will hold back on making home improvements (e.g. a new kitchen, carpets, roof, etc.)

• 32% of those who were saving for a deposit on a flat or house say they have decreased or stopped saving for this in response to the increases in the cost of living

• 29% of those who were saving for a specific purchase such as a wedding, car or holiday say they have decreased or stopped saving for these

• Over half (53%) of respondents are either very worried (25%) or fairly worried (28%) about not being able to save enough for retirement

The Barometer indicates that many people are worried about managing their finances. Around half are worried about rising fuel and energy costs (49%), while 24% are worried about paying for household groceries.

With the crisis expected to continue and potentially worsen into the autumn, 15% say that, in the last six months, they have fallen behind on or missed payments for credit commitments or domestic bills for any three or more months.

For those who are worried about their personal finances, this is already having a negative impact on their wellbeing, with 31% who say money worries are negatively impacting their mental health and 22% who say it is negatively impacting their sleep.

Brits dipping into savings and borrowing to afford day-to-day costs

Against this backdrop, many of these Brits are taking action where they can to cover the household cost of rising outgoings over the last six months. The most common way cited to do this is by reducing household spending (42%).

Although most respondents are currently putting money aside for something or are paying off debts or a mortgage [see footnote 1] (84%), for those who have taken more money out of savings or investments over the past 6 months than they have put in, many are dipping into these savings or investments to cover the increased cost-of-living (49%).

A higher proportion of people have taken out more money from their savings than they put in over the past 6 months, than did during lockdown (22% vs 17%).

Many have already taken out new or additional debt, or plan to take out more in the next six months (29%), and of those taking out new or additional debt, one in four who plan to do so will be using it to pay for household bills e.g. rent, mortgage, council tax, electricity/gas, insurance, etc.) (24%), and around one in five to pay for groceries (22%) or pay off other debts (20%).

Analysis of TSB’s own customer debit card spending data shows that since June 2021:

• Spending on gas and electricity has risen by 54%, following the energy cap increase in April and ahead of the upcoming energy cap increase in October

• Spending on fuel has increased by 12%, following rising prices

• Spending on groceries has decreased by 2%, as shoppers shift spend towards lower price supermarkets or shop less frequently

• Spending on clothing decreased by 2%, while home & DIY decreased by 6% (following a rise during lockdown), as customers cut back on non-essentials where they can

The Barometer research also shows that almost a third (29%) would look to a spouse or partner to go to advice about their finances, while a quarter would look to their bank (25%) or an independent adviser (25%).

Carol Anderson, Director, Branch Banking of TSB said:

“This research exposes the emerging gap between resilient households, with healthy rainy-day savings built up during the pandemic, and those with no savings who are struggling to get by.

“For those who are feeling worried about the cost-of-living, it’s important to speak to someone that you trust.  We’ve seen TSB customers coming to us for support and we’re holding around 5,000 customer meetings every week to help them manage their money and feel more confident about their plans.”

Notes to editors

 

• Online interviews among a nationally representative quota sample of 5,812 adults aged 18-75 in the UK conducted by Ipsos on behalf of TSB from 3^rd to 7^th June, 2022.  Data weighted by age within gender, region, working status, social grade and education to a nationally representative profile of this audience.
• Results are based on the following subgroups:
• Adults aged 18-75 in the UK (n=5812)
• All who say something worries them most about their finances right now (n=4810)
• All who have or will delay or cancel a large purchase due to increase in cost of living (n=1437)
• All who have taken more money out of savings or investments in past 6 months than put in (n=1355)
• All who have taken out or expect to take out new or additional debt (past 6 months/next 6 months) (n=1664)
• All who were saving for a deposit on flat or house (n=610)
• All who were saving for a specific purchase such as a wedding, car or holiday (n=1103)
• Footnote 1: Paying into a pension, Paying off a mortgage (for yourself or someone else), Saving for a specific purchase such as a wedding, car or holiday, Putting money aside for an emergency or unforeseeable event, Paying off debts (other than a mortgage), Saving for a deposit on a house or flat, Putting money into other long-term savings or investments, Paying into a life insurance policy, Saving money for a rainy day
• TSB’s Money Confidence Barometer measures an individual’s confidence in their financial outlook across six different scenarios:
  • Confidence in saving for a comfortable retirement 
  • Confidence in putting money aside to pay for things, such as a holiday, new car, home renovation and furniture
  • Confidence in having enough money to pay fixed household monthly outgoings such as rent, mortgage, and bills 
  • Confidence in having enough to pay for household day-to-day living costs such as groceries, transport, and daily treats
  • Confidence in paying for unforeseen household expenses like repairing or replacing appliances, car repairs, or other unexpected bills
  • Confidence in having enough money over the year ahead to support yourself
• The full report will be published shortly
• Money Confidence was first measured in June 2021
• TSB has set out the ways that it is helping customers with the rising cost of living:

The information contained in this press release is intended solely for journalists and should not be used by consumers to make financial decisions. ​