Protecting savings in the current cost-of-living crisis is starting to impact those who’ve never had to think about their daily spending before. Many people are having to dip into their savings to pay bills and support their lifestyles. So, what can you do to protect your money?
“A third of consumers with savings are using them to offset their cost of living.”
KPMG consumer research – April 2022
Back in February 2022, Tesco Bank shared data revealing that 68% of people who budget household spend were now accessing their savings to support them until payday. Roll on six months, fuel, food, and energy costs have risen dramatically. As life gets more expensive, ironically, so does the need for more significant savings. As things cost more, so do repairs. So cash savings need to be kept separate and be large enough to pay out in an emergency.
Here are six ideas for protecting your savings in the cost of living crisis:
- Aim for the highest savings rate
Make your money work as hard as possible by earning the highest interest rate available. This is the key to protecting your savings, which is why it’s our first point. Fixed-rate accounts usually offer better deals, but some easy-access savings accounts offer attractive interest rates. So, it’s worth shopping around to compare accounts. Our financial planning team can provide recommendations. - Reduce your existing costs
It sounds obvious, but this may be something you’ve never had to do before. It’s a good idea to review your existing outgoings and work out whether you can cut any spend. Do you have any old subscriptions for TV channels or magazines you’re no longer interested in? Could you find a better mortgage deal? Are you paying too much for your utilities or insurance? It’s often cheaper to pay for car, content, or buildings cover annually. - Check the level of your protection
As well as checking you’re paying an affordable premium for your insurance, make sure it gives you all the cover you need. This will ensure you are less reliant on using your savings in an emergency. In addition, policies, such as income protection or critical illness cover, will give you peace of mind while the economy is increasingly volatile. Our financial planners can advise you on suitable insurance. - Create a realistic budget
Even if you and your partner are both on good salaries, rising costs are testing even the most affluent households. Therefore, it’s helpful to have a budget to hand, so you know what you can spend each month. List things like household bills, food shopping, fuel costs, and a few luxuries you cannot live without. When you start to monitor your spending, you’ll discover ways to reduce certain costs. - Use less fuel and energy
At the time of writing, fuel costs are at record levels, and energy bills are set to rise even higher in the autumn. Be prepared in advance, so you don’t have to dip into your savings. Think about regular journeys you do for business or leisure. Could you car share to get to work or an evening class? Plan your journeys, so they’re more efficient. For energy tips, you can read our blog, Eco-friendly homes: cut costs on energy bills. - Shop around and second-hand
You’ll have specific shopping preferences, such as buying clothing from a specific retailer, or you might prefer new items rather than second-hand ones. But it’s worth exploring your options online and on the high street. There are savings to be found if you look hard enough, including using discount codes and offers on shopping apps. Also, browse charity shops in affluent market towns to find quality goods.
42% of UK adults have reduced or stopped regular savings due to the increase in the cost of living
WEALTH at work survey
We advise you to think carefully before stopping your savings, as there may be ways to protect your money and cover your daily living costs. By having a review with our financial planners, you’ll gain insights into your current financial position and recommendations for savings strategies. We’ll also check your insurance policies, pensions, and investments. Our aim is to make sure you have a healthy financial plan to help you protect your savings.
Worried about how the cost-of-living crisis is affecting your savings? Get in touch with our financial planning team for a review.
Sources:
https://www.fool.co.uk/2022/02/25/is-the-cost-of-living-crisis-depleting-your-savings/
https://www.savoo.co.uk/resources/cost-of-living-crisis-money-saving-tips