Compare the Market’s latest Household Financial Confidence Tracker has found that almost half of people (45%) admit they need to dip into their savings around three times per month to afford everyday living costs, despite optimism about their household finances.
Over half (61%) feel more optimistic about their finances compared to this time last year, with one in three (39%) feeling more pessimistic. Three in four people (76%) feel confident about being able to manage and pay their household bills in the coming months. In fact, almost half (47%) said they were ‘quite confident’ they will be able to do so.
This is a positive shift from the data reported in Compare the Market’s last Household Financial Confidence Tracker in January 2024, which showed a quarter of households say they found it difficult to afford their most recent household bills (25%).
To afford many of these everyday costs, people foresee themselves having to use their credit card around once a week on average, on food shopping (25%), online purchases (23%) and their upcoming holidays (23%). Credit cards remain a popular way to borrow for everyday spending, and they offer additional benefits such as rewards or cash back. Credit cards also typically provide protection on purchases, which isn’t the case with other payment methods. However, our recent research shows one in five (20%) people only managed to make the minimum repayment on their most recent credit card bill and less that less than half of borrowers (48%) are regularly paying off their credit card balance in full each month.
When asked how often people are needing to dip into their monthly savings to afford everyday living costs, almost half (45%) admit they do so at least once a month and one in five people (21%) need to at least once a week. Overall, people are having to dip into their savings around three times per month on average. A quarter (27%) say they’re unable to save anything at all and another quarter (25%) can save only between £100-£250 each month.
In order to mitigate the impact of increasing everyday costs, people have cut back on buying clothes (42%) and going on holidays (36%). Nearly half (48%) have had to cut back on eating out, only doing so once a month, on average. However, they admit not cutting back on their forms of transport (16%), their subscriptions (26%) and food shopping (27%).
In terms of summer travel plans, 41% can afford a holiday in the UK, while only one third (34%) are able to head to a European destination. Only 8% can afford to do both. Over a quarter of people (27%) are having to take on debt including credit cards and buy-now-pay-later plans in order to pay for their holidays this year.
Andy Hancock, Chief Growth Officer at Compare the Market, comments:
“It is encouraging that people are seemingly confident about their ability to manage and pay their everyday bills in the summer months ahead, signalling a positive outlook on the consistency and reliability of their financial situations.
“However, our research shows that many people are still struggling to save on a monthly basis, and a significant number are having to rely on those savings each month to pay for everyday bills or lean on credit cards for additional costs such as holidays. Credit cards can be a valuable tool for making purchases, such a paying for holidays. However, when taking out a credit card you have to be mindful of not borrowing more than you can afford. It’s worthwhile paying off your credit card balance in full every month to avoid paying interest.
“Households can potentially benefit from shopping around to find a deal on credit cards and loans, as well as home and travel insurance policies in the summer months ahead. Understanding which available policies can save you money on everyday living costs can not only decrease those outgoing spends but also contribute to an individual’s monthly savings pot.”
