‘Achilles heel’ Middle earners ‘burning through savings’ to pay soaring energy bills

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Couple stunned by potential savings

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Britons who earn an average wage are being warned they will probably have to dip into their savings to meet rising prices. The proportion of middle earners with enough savings to be resilient will dip below 50 percent over the next 12 months, according to Hargreaves Lansdown.

The cost of living crisis will continue to affect Britons’ finances with many people forced to use their savings to survive the cost of living crisis.

Results from the 2nd Hargreaves Lansdown Savings and Resilience Barometer, produced with Oxford Economics in July 2022, show that average earners will be hard hit over the next few months.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “Average earners are set to face a savings crisis over the next 12 months, as rising prices force them to spend their way through their lockdown savings, so they end this period with a horrible dent in their financial resilience.

“It doesn’t mean they’ll face bigger challenges than those on lower incomes, but savings are their Achilles’ Heel.”

Experts agree that three months or more of savings is generally needed to ensure people remain financially resilient.

Ms Coles added: “The proportion of the middle earners with enough savings to be resilient will dip below 50 percent over the next 12 months.

“On the one hand, it could be worse. Lower earners will start with lower levels of saving and end with less: only 30 percent of the lowest fifth of earners have enough savings now, and only 24 percent will have enough in a year’s time.

“For those with no savings to fall back on, those who earn less than average but who aren’t on very low incomes are likely to borrow more through things like credit cards and loans in order to make ends meet.”

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However, Ms Coles says there are things people can do to avoid eating into their hard earned savings.

Simple things like shopping around more and changing shopping habits can make a huge difference.

Middle earners could have wriggle room when it comes to spending less so that they can keep hold of more of their savings.

Britons can make big savings on things like broadband and the supermarket shop.

Ms Coles added: “While the ONS [Office for National Statistics] data shows that most people earning between £30,000 and £40,000 are cutting back on non-essentials and using less energy in the home, there are other changes to consider, so for example only 32 percent of this group are shopping around more.

“It’s worth going through your budget carefully, looking not only at the non-essentials you can cut, but also at whether you can spend less on the essentials.

“Shopping around for everything from cheaper mobile and broadband, to cheaper brands or a cheaper supermarket can shave vital chunks from your spending, help you protect more of your savings, and hang onto some of the resilience you built over the past two years.”

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