Consumers save less due to higher prices

Consumers are saving less and spending more due to the cost of living crisis.

That’s according to the latest savings and investment index from the Bank of Ireland, which measures households’ attitudes toward savings and investment.

The results reflect the impact of higher prices, and back to school costs faced by many families.

Today’s numbers show that the savings and investment index has fallen to its lowest level since the survey began, with a significant drop in the number of consumers who feel they are saving enough.

While more people save, the data reveals that they save less.

The “Do you save” index rose six points to 96, but the “Amount of Savings” index fell 12 points to 78, its lowest level ever.

When asked if it was a good time to save in six months, that score fell to 85, the second lowest since 2019.

The numbers contrast sharply with consumer attitudes during the pandemic, when the savings index reached its peak.

Survey results continue to suggest that consumers may be trying to save in the face of uncertainty but struggle to do so, given the rising cost of living.

“Rising inflation is having a huge impact on how people view their finances,” said Kevin Quinn, senior investment analyst at Bank of Ireland.

“So much so that despite the challenges presented by Covid and the Russo-Ukrainian war, the impact of higher prices is perhaps the most significant in the past three years in terms of how people view saving and investing.

“For some, the environment has proven so challenging that they have cut back on their savings,” he added.

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The results show that inflation is the biggest concern for consumers.

The war in Ukraine and Covid both fell significantly on the list of main concerns from 32% in May to 17% in August, while Covid almost fell off the list of concerns with only 3% seeing it as their biggest concern, below climate change at 16% , the global recession by 14% and the cost of housing by 12%.

The indicator highlights the different attitudes of the age groups.

Inflation and cost of living rank highest among both 30-59 and 16-29 year olds.

While the 60-plus age group expressed increasing concern about the cost of living, this age group alone rated the war in Ukraine as their number one concern.

When asked if consumers think this is a “good time to invest,” responses have fallen below what was recorded during the pandemic and after the Russian invasion of Ukraine.

38% now believe they are not investing “anywhere near as much as they should” – the highest level since the survey began.

“With investment markets now volatile – despite gains in the summer months – consumers remain concerned about the broader economic environment and there is a conservative tone that reflects the conversations we have with many clients,” Quinn said.

Meanwhile, when asked about financial preparedness for retirement, the answers haven’t changed significantly.

However, Irish people are less confident about how comfortable they are with retirement, with that part of the index dropping from 125 in November 2021 to 107 in August 2022.