Quarter of families plan to spend less on Christmas due to rising living costs

Almost a quarter (23%) of UK families with children living at home are set to spend less on Christmas compared to last year, as the rising costs of living and household bills, alongside the ongoing effects of the pandemic, hit household budgets.

According to comparethemarket.com’s latest Household Financial Confidence Tracker,two-fifths (41%) of families feel their financial wellbeing is worse off compared to the “pre-pandemic Christmas” of 2019. Less than a third (31%) say it’s in better shape.

Half (50%) of families with children who plan to cut Christmas spending say the pandemic has squeezed their finances and they cannot afford to spend as much as they usually would. There appears to be a rise in families using their savings, as more than a third (36%) will dip into rainy day funds, up from 31% last year. There has also been a sharp rise in credit card use, with over a third (34%) relying on this payment method – up from 24% in 2020. Alternative credit schemes, such as Buy Now Pay Later products, have had a marginal increase in people using them from 9% to 11% this year.

The decline in Christmas spending comes after a quarter of families with children at home (25%) said they have found it challenging to pay bills in the last week, compared to only 18% of those without dependents. More than half of UK households (47%) with children feel more pessimistic about their finances compared to this time last year – rising to 55% for those with adult children still at home. Rising living costs (89%), increasing energy costs (85%) and worries over affording Christmas (49%) all contributed as reasons for this pessimism.

Looking to the new year, nearly a quarter (24%) of families with children living at home are worried about being able to pay their household bills over the next few weeks.

Ursula Gibbs, Director at comparethemarket.com, said “As we approach Christmas many household finances are starting to look quite stretched. Rising living and energy costs are a worry for many households across the UK right now, especially for those with dependents at home. With uncertainty around inflation rising, many are taking a prudent approach by spending less this Christmas. However, what is concerning is how some families may be relying on additional funding to cover the costs.”