Britons are saving less as the cost of living rises, with data showing funds have fallen by nearly 40% year-on-year.
With the rising cost of living, disposable incomes are being squeezed and Britons are being forced to dip into savings built up during Covid lockdowns and restrictions.
Data from money management app Plum revealed that on average, the total amount saved by 500,000 customers in January 2022 fell 39% year-on-year.
This despite an increase in the average amount of money deposited (8%) during the year to January 2022.
In a separate survey, Plum found that a third (32%) of families have no savings for rainy days.
Only a quarter of the 2,000 respondents said they had saved a “healthy” amount, while 43% said they had a small amount set aside.
As inflation hit its highest level in 30 years, savers responded by changing the amount and frequency of their savings.
Plum found that 13% reduced payments to their savings accounts, 12% switched from regular payments to depositing money ad hoc, while 11% suspended or canceled their regular savings.
However, the most common savings goals are to build a fund for a rainy day (44%), for a vacation (20%) and 15% say it’s for home renovations.
Victor Trokoudes, CEO and co-founder of Plum, said: “The propensity of households to save as much of their income as possible, a habit many have adopted during the pandemic, is starting to fade.
“The cost of living is now significantly higher than a year ago and disposable income is squeezed.
“As families tighten their belts, it’s understandable that they want to temporarily reduce the amount they regularly save. But putting money aside now to prepare for higher bills when they arrive is more important than ever.
“Obviously saving for a rainy day is important, but for those who already have a buffer in place, the focus is on building a kitty with a specific goal in mind. If that means saving for the long term, say at least five years, people should consider investing their money instead.