Majority now worried about declining value of their savings

ALMOST two thirds of Irish people are concerned about not getting a return on their savings as inflation and the cost of living eat away at their cash.

Younger people and the over-55s are reported to be the most worried about the declining value of their savings as the cost of living continues to surge.

Some 65% of men are significantly more concerned about the impact of inflation on their savings than women at 56%, according to a savings and investment survey conducted by Aviva.

A similar survey from Bank of Ireland found customers were most worried about the rising inflation and cost of living as its Savings and Investment Index has dropped to its lowest level since the survey began five years ago, to 87 in August from 90 in May.

Given the rising cost of living, consumers are not saving like they used to as many may be trying to save in the face of uncertainty but are struggling to do so.

There has also been a significant drop in the proportion of consumers who feel that they are saving enough, reflecting the impact of rising prices and the back-to-school costs faced by many households.

Compared with May, consumer concerns have significantly changed, with just 3% seeing the pandemic as their biggest concern, below the war in Ukraine (17%), climate change (16%), global recession (14%) and the cost of housing (12%). Inflation and the cost of living ranked highest amongst both 30-59 year-olds and 16-29 yearolds and while the 60+ age group were alone in ranking the war in Ukraine top of their concerns.

Investment strategist Kevin Quinn of Bank of Ireland said: ‘Rising inflation is having a significant impact on how people view their finances.

‘So much so that despite the challenges presented by Covid and the Russia-Ukraine war, the impact of rising prices is possibly the most significant in the past three years in terms of how people view saving and investing.

‘With interest rates still at low levels and inflation at around 9%, consumers clearly recognise that real purchasing power is quickly eroding and it is little wonder that it has caused people to re-evaluate.

‘For some the environment is proving challenging enough that they have scaled back on their savings. With investment markets being so volatile right now – even despite gains made in the summer months – consumers remain nervous about the wider economic environment and there is a conservative tone which reflects the conversations we are having with so many customers.’

The Aviva survey also found a quarter – 24% – of savers do not think about getting a return on their savings while 16% are not concerned about returns at all.

In relation to the reasons for saving, financial security was the number one savings objective among 47% of respondents, followed by saving for holidays and a rainy-day fund each at 31%, and home renovations at 23%.

Eoin Kennedy of Aviva Ireland said: ‘Our survey reveals that the “rate of return” offered is the most important factor in choosing a savings option, followed by the fees charged.

‘This is most evident amongst the youngest and oldest age groups – the groups with typically the least and most amount of savings being most worried in this regard.

‘The survey also shows how our saving priorities shift with our stage in life. For example, saving for a car is a priority for 4 in 10 young people, whereas slightly older cohorts are much more likely to be saving for their children’s education.

‘Young adults are probably saving more than previous generations, such is the pressure to build a deposit for a house purchase, save for a possible wedding or for other important milestones in life.

‘We would urge savers who are concerned at the lack of return on their savings to consider getting financial advice from a broker.’

‘Real purchasing power is eroding’ ‘They have scaled back on savings’