29 July 2022
If you are covering the latest Bank of England money and credit statistics, please see the following comment from Rosie Hooper, chartered financial planner at Quilter:
“New money and credit statistics from the Bank of England show the amount people that are saving has plummeted while consumer credit has increased. These are worrying figures that illustrate the strain the nation’s finances are currently under.
“The combined net flow of savings into both deposit and NS&I accounts in June was £1.9 billion, down from £5.6 billion in May. This sits well below the average monthly net flow of £4.7 billion during the 12-month pre-pandemic period up to February 2020. The cost of living crisis is clearly starting to hamper people’s ability to put money away for the future as it gets sucked up by increased prices.
“Meanwhile, worryingly individuals borrowed an additional £1.8 billion in consumer credit in June, on net, following £0.9 billion of borrowing in May. This now sits above the 12-month pre-pandemic average up to February 2020 of £1.0 billion.
“The increase in borrowing is really cause for concern as while it is still warm the worst of the energy crisis is not in full force. As the nights draw in and temperatures plunge things could get significantly worse. Credit cards have some of the highest interest rates and if the borrowing is to pay for the current higher cost of living or paying for essential bills, then people could very quickly spiral into unmanageable debt.
“The housing market looks set to cool also as approvals for house purchases, an indicator of future borrowing, decreased modestly from 63,700 in June, from 65,700 in May. This now sits below the 12-month pre-pandemic average up to February 2020 of 66,700 pointing to the pandemic housing boom coming to an end.
Rosie’s tips for boosting your savings:
- Understand your incomings and outgoings: Take a look at what you have coming in each month and what comes out of your account in terms of bills and payments. This will give you an idea of what might be possible when it comes to saving, or if you need to make any cutbacks to make ends meet.
- Create a budget: Get your financial position for a normal month written down on paper. You are more likely to stick to a budget this way, allocating specific amounts for specific things. This can also be easily altered as and when your circumstances change.
- Have an emergency rainy day fund: While we like to save for something in particular you should make sure you at least have a rainy day fund in case of emergencies, such as a broken boiler or car repairs. Aim to have three to six months of expenses in this pot, and be sure to top it up should you need to dip into it.
- Consider investing for the long-term: Once you have built up a decent savings pot you should consider creating an investment pot for longer-term savings. Putting money to work in the stock market for five years or more gives it the best chance to grow at a greater rate than inflation. The sooner you invest and the longer you do it for, the more likely you are to have the potential for healthy returns regardless of short-term blips. There are many services out there that will help get you started.
- Seek professional advice: If you are in a position to speak to a financial adviser. They can help create a financial plan tailored to you that will help see you through the ups and downs, while also tweaking it according to your real-time circumstances. This ensures your money is working as hard as it can be. Other services such as Citizens Advice or Step Change can help you with debt advice, while there are a number of websites out there with great guidance to get you started on your saving journey.
