More people than ever concerned they are not saving enough

More people than ever are concerned that they are not saving enough money, with inflation and the cost of living the biggest worry for consumers, according to Bank of Ireland.

Bank of Ireland’s savings and investment index dropped to 87 in August from 90 in May, with consumers citing inflation and the cost of living as their biggest worry, up from 22 per cent to 29 per cent.

There has also been a significant drop in the proportion of consumers who feel they are saving enough, reflecting the impact of rising prices and the back-to-school costs faced by many households.

Both the war in Ukraine and Covid have dropped back considerably in the list of top concerns in the third quarter, from 32 per cent in May to 17 per cent in August.

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Covid has almost dropped off the list of concerns with just 3 per cent seeing it as their biggest concern, below climate change (16 per cent), global recession (14 per cent) and the cost of housing (12 per cent).

Inflation and the cost of living rank highest among both 30-59 year olds and 16-29 year olds and, while it increased significantly among the over 60 age group, this age bracket was alone in ranking the war in Ukraine top of their concerns.

Consumer attitudes to saving are changing significantly in the face of rising inflation. In contrast to the pandemic period when the savings index reached a peak, the most recent survey illustrates the impact of inflation.

Back in May 2020, the index for a “good time to save” reached a high of 117 whereas by August 2022 it had dropped to 92. When asked whether it will be a good time to save in six months, that score drops to 85, the second lowest level since 2019.

More people are now saving but the “savings amounts” subindex has sharply declined with less people feeling they are saving enough. The index for “do you save” rose 6 points to 96 but the index for “savings amount” dropped 12 points to 78, its lowest ever level.

“The survey results continue to suggest consumers may be trying to save in the face of uncertainty but they are struggling to do so, given the rising cost of living,” Bank of Ireland said.

When asked whether they see it as “a good time to invest”, the responses dropped to a level below what was seen during the pandemic and after the Russian invasion of Ukraine.

At the same time, 38 per cent of people now think that they are investing “nowhere near as much as they should”, which was the highest level since the survey began.

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

Bank of Ireland chief investment strategist Kevin Quinn said rising inflation is having a significant impact on how people view their finances.

“So much so that despite the challenges presented by Covid and the Russia-Ukraine war, the impact of rising prices is possibly the most significant in the past three years in terms of how people view saving and investing,” he said.

“With interest rates still at low levels and inflation at 9 per cent, consumers clearly recognise that real purchasing power is quickly eroding and it is little wonder that it has caused people to re-evaluate.

“For some, the environment is proving challenging enough that they have scaled back on their savings.”

Mr Quinn added that a “conservative tone” had taken hold among Irish consumers in response to macroeconomic factors.

“With investment markets being so volatile right now — even despite gains made in the summer months — consumers remain nervous about the wider economic environment and there is a conservative tone which reflects the conversations we are having with so many.”