Amid economic challenges and inflationary pressures, savers have been grappling with their financial well-being. However, our recent survey of nearly 2,000 people offers hope as the financial confidence of savers showed significant improvement during the second quarter of the year.

Although consumers are still adjusting their spending habits to cope with inflation, the survey reveals some positive trends.

Growing financial confidence

Our research discovered a notable upswing in financial confidence. During the second quarter, 62% of respondents reported feeling confident in their financial position, compared to only 44% during the first quarter of the year. Conversely, the number of individuals lacking confidence in their financial situation decreased from 25% to 18% over the same period. These findings indicate a collective shift towards a more optimistic outlook.

The survey highlighted an intriguing trend related to age and financial confidence. The highest level of confidence was observed among savers of post-retirement age (between 65 and 74), with an impressive 69% feeling secure in their financial position due, no doubt, to decades of prudent decision-making.

Comparatively, 61% of those aged between 55 and 64 expressed confidence, while the figure was 56% for the 45 to 54 age category. This suggests that those in retirement may have better financial security and are less affected by inflationary pressures.

Improving disposable income

The study also explored the changes in disposable income among savers. During the second quarter, 29% of respondents reported experiencing an improvement in their disposable income, marking a substantial increase from the mere 10% recorded during the first three months of the year. This positive change likely contributed to the overall boost in financial confidence.

Once again, age played a pivotal role in this aspect of the study. Among those aged 65 to 74, 38% reported improved disposable income, while the number dropped to 15% for those aged between 55 and 64.

Investment focus

When it comes to savings and investments, cash savings continues to be the preferred option for savers, with fixed-rate accounts coming out on top. More than one in five savers (21%) plans to increase savings held within fixed-rate cash ISAs in the third quarter of the year, with the same proportion also placing increased amounts in fixed-rate non-ISA accounts.

Additionally, 19% will increase savings in instant access ISAs, with 20% placing more cash in non-ISA equivalents.

Other vehicles where savers plan to increase investment levels include shares (9%), investment funds (8%) and corporate or Government bonds (7%).

Adjusting spending to tackle inflation

While financial confidence improved, savers are still adapting their spending habits to manage the impact of inflation. Notably, certain areas have experienced significant cutbacks, including food shopping, home energy usage, dining out, holidays, socialising and car usage. Amongst the savings identified are:

• Food shopping: 45% of respondents have reduced the amount of food they buy during their weekly shop
• Home energy usage: 62% have reduced home energy consumption in the past three months
• Dining out: 49% have cut back on dining out, leading to reduced spending in restaurants
• Holidays: 34% have reduced the amount they spend on vacations, opting for cost-saving alternatives

Cutting it out completely

The survey also identified areas where consumers have completely cut spending due to inflationary pressures. These include cinema (13%), concerts or the theatre (9%), takeaways, and days out with entry costs (both at 8%). These findings illustrate the broader impact of inflation on discretionary spending.

Derek Sprawling, Paragon Bank Savings Director, says: “Despite the high inflationary environment we are living through, both confidence and disposable income improved during the second quarter of the year. This may align with the warmer weather and people having to use their heating less and some costs, such as petrol, starting to come down.

“The improved confidence may also reflect the demographic of the saver population. Generations who have been through tougher times and have been disciplined in clearing their mortgage have earned themselves that increased confidence. With savings rates heading upwards, this means they have been able to generate better returns on their money than in previous quarters.”

To learn more about savings accounts, please visit our Savings Explained page.