More than four in five experiencing increase in living costs

More than four in five (82 per cent) people have seen their living costs such as grocery or energy bills and day-to-day essentials increase in the past few months, according to new research by TSB.

The bank’s research, through its money confidence barometer, indicated that as a result of the cost of living rises, nearly a quarter (23 per cent) have dipped into savings, a fifth (19 per cent) said they have changed their usual habits and more than a third (36 per cent) have cut back on spending on non-essentials.

A fifth (19 per cent) have increased their debts, by taking out new credit, increasing existing credit, or going into their overdraft, the survey of 5,000 people in December found.

One in seven (13 per cent) people said they are struggling,

More than eight in 10 (83 per cent) of those who are struggling rent their home.

Despite these concerns, consumers money confidence in managing their money, making plans for the future and choosing the right products and services generally remains consistent with the previous iteration of TSB’s Barometer, while over a third have increased (36%) or maintained (36%) savings since June 2021.

The research also found that 67% of Brits who use online banking feel more confident with their money as a result of being able to: easily check their bank balance (59%), using it to help with budgeting (30%) and avoid going into their overdraft (18%). 42% say using online banking helps them save money every month – £166 on average.

With 2022 set to be a challenging year for household finances, encouragingly 80% of those surveyed say they’re likely or highly likely to use digital banking.

The research also shows that more than one in 10 (13%) say that they are struggling, with renters hit the hardest. Of those who are struggling, 83% are renting compared with 15% who are homeowners. Over half (55%) of Brits are likely or highly likely to cut back on spending or switch home suppliers to save money (43%), and 18% may take out a loan.

Against this background, Buy Now Pay Later (BNPL) services continue to grow in popularity, with many consumers using Klarna, Clearpay and others to spread payments or pay later. Over the past year TSB has seen a significant growth in transactions via Klarna. 18%¹ of UK adults now use BNPL at least once a month, with 11% saying they use it at least once a week.

However, research also suggests that some people using BNPL are doing so when they are struggling financially. Of those who use BNPL, 1 in 4 say they rarely have the money in their account to pay in full for the things they are buying.

Mark Curran, Customer Banking Director at TSB, said “It’s clear that many people are concerned about the impact of bills going up and rising inflation.

“Now is the time to really get on top of your finances and our research shows that many people are able to save money and budget better by using digital banking. We know that many of our customers need support and we’re delivering new tools and features that will help them to develop confidence with their finances.”