The rise in the cost of living is adding pressure to households with less than half of British families thinking they will be able to save money this year, the latest official figures reveal.
In December, only 46% believed they would be able grow their savings, with two-thirds of families saying their cost of living had already increased, according to the Office of National Statistics (ONS).
This increased to 76% among those aged over 70, and to 74% among self-employed people.
Inflation has jumped to the highest level in 30 years, reaching 5.4%.
Households are already facing a significant pressure with the cost of other utilities also set to increase. Energy customers risk the prospect of a 50% increase in their gas bills from April as the energy price cap comes to an end.
Prices of food and non-alcoholic drinks grew strongly during the year, as well as restaurants and hotels, furniture and household, goods and clothing and footwear.
When looking at food costs, bread and cereals, meat, and vegetables such as potatoes went up in price.
The cost of transport and motor fuels also increased, adding more than 1 percentage point to the annual rate of inflation.
“The rampant rise in the cost of living has squeezed the life out of budding savings habits. Soaring energy bills, petrol prices and food costs are swallowing an ever-increasing slice of our cash every month. It’s enough of a struggle to make ends meet, let alone have anything left over to save,” Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.
“The fact that the price of essentials has risen so far and so fast means that those on lower incomes are facing a horrible struggle to pay the bills. For those who spend more time at home, keeping their homes warm has become eye-wateringly expensive. Overall, two thirds of people said their bills had risen, but for older people this rose to three quarters.”
Between April and June 2020, during the start of the COVID pandemic, UK households' saving ratio reached a record high of 24%. By July to September 2020, this had decreased to 13% and by July to September 2021 this further fell to 9%, though remained above pre-pandemic levels.
Looking forward, more than a third of people — ranging between 35% and 39% — said they felt it would be more than a year before life returned to normal.