The cost of living crisis is causing more financial distress than the Covid pandemic.
Research by Aegon, which has been tracking people’s financial concerns on a regular basis, found that almost two in three adults (63 per cent) now said they were worried about their finances. This compares to just a third (36 per cent) at the height of the pandemic.
The research found money worries are being felt fairly consistently, regardless of household income. While lower income households may be least resilient, concerns are not limited to any wealth band.
However, there is a notable difference when looking at the gender split, with seven in 10 (69 per cent) of women saying they are worried about their finances during the cost-of-living crisis, compared to 56 per cent of men.
Of those with money worries, a quarter (25 per cent) are just concerned about their short-term finances and 27 per cent are just concerned about their long-term finances. But in addition to this, nearly half (45 per cent) are concerned about both their short-term and long-term finances.
The research also looked in more detail at the experiences of adults who admitted to having money worries. Since the start of the cost-of-living crisis over half (54 per cent) have cut back on day-to-day expenditure while a third (31 per cent) have cancelled subscriptions or unnecessary financial commitments. This could include products such as a TV or music streaming services.
However, while these are positive steps to help lower daily expenditures, the research also points to a rise in the number of people who have cut back on the amount they save and have dipped into their financial reserves.
Nearly a third (32 per cent) of those with money worries have decreased the amount they save and a fifth (20 per cent) have used up some or all of their emergency savings. However, on a more positive note, only one in twenty (5 per cent) have reduced or stopped contributions to their pension.
Steven Cameron, pensions director at Aegon says: “The coronavirus pandemic caused huge social and economic turmoil, affecting our lives in different ways. However, when focusing on the impact on personal finances, there were significant disparities, with some seeing their income fall while others were unaffected and could even build up their financial resilience as expenditure reduced.
“Unfortunately, as we started to get back to normal after the pandemic, we’ve been hit by the worst cost-of-living crisis in most people’s living memory.
“The research shows money worries now are even greater than during the pandemic. Many of our most vulnerable will face the greatest challenges with some already affected financially by the pandemic now being hit again by soaring inflation. But as prices rise throughout the economy, individuals across the income spectrum are concerned and feeling the squeeze.
“Our research shows many are already taking action to cut costs by reducing day-to-day expenditure and cancelling unnecessary commitments. But worryingly, the research also points to a decrease in saving rates. While this may be unavoidable, it could have long-term implications on financial resilience. And when it comes to your pension, reducing or stopping contributions could mean missing out on employer contributions and having thousands less in funds to get by on in retirement.”