Rising prices and rates makes hanging on to cash harder

Myron Jobson, senior personal finance analyst at interactive investor, comments on the Money & Pensions Service savings survey.

• A new survey published today by the Money & Pensions Service found that a quarter of UK adults have less than £100 in cash savings. 
• Almost half of people who use credit are anxious about how much they owe, while a third are anxious about the number of credit products they have. 

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The findings of Money and Pensions Service’s survey outline the stark reality for millions of people across the UK amid the biggest fall in living standards in generations. Rising prices and interest rates mean that hanging on to cash is becoming increasingly difficult - and those living on a bare bones budget have nothing left to give.

“Higher spend on food, energy and car fuel eats into the amount many people have to save for everything else - whether that’s other living expenses, emergencies, leisure, or saving for their future. Many of those who were fortunate enough to become accidental savers during the pandemic will be left with little option but to raid their lockdown savings to cover additional costs.

“It is also difficult to maintain financial footing when there is so much up in the air. Whispers from Whitehall suggest that taxpayers will inevitably face a higher tax burden in the coming years as the government seeks to fill the black hole in the public’s finances and stimulate economic growth. And with the Bank of England warning that the UK is facing its longest recession since the Great Depression a century ago lays, financial resilience is under threat for many.

“This lays bare the importance of taking steps today to bolster financial resilience now to give you some peace of mind in the coming months – for those who are able. The need to build and maintain a cash buffer has become increasingly important - three month’s salary worth is a good rule of thumb, if not more.

“Those with high levels of debt should consider what they can do now to reduce their debts as the cost of credit is only rising, just as the prices of everyday essentials are flying.

“Those struggling with debt do not have to suffer in silence – there is support out there. They should act swiftly and contact their creditors for more support. It is worth consulting a debt advice charity such as StepChange or Turn2Us and they will go through all of your options.”