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Rising cost of living eats into consumer savings rate as disposable incomes take a hit

Figures from the Central Bank revealed that household deposits stood at over €136bn at the end of last year

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While younger consumers are most concerned about the rising cost of housing and rent, over 30s are more focused on inflation, as well as the impact of the war in Ukraine. Relatives and friends attend the farewell ceremony of a combat medic in Kharkiv, Ukraine on Tuesday. Photo: Reuters/Ivan Alvarado

While younger consumers are most concerned about the rising cost of housing and rent, over 30s are more focused on inflation, as well as the impact of the war in Ukraine. Relatives and friends attend the farewell ceremony of a combat medic in Kharkiv, Ukraine on Tuesday. Photo: Reuters/Ivan Alvarado

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The number of Irish people who are saving regularly has dropped from the highs recorded during the pandemic as consumers brace themselves for rising prices.

In May, 40pc of those surveyed by Bank of Ireland said they were saving regularly, a drop of 7pc from February. The Savings Index recorded by Bank of Ireland also fell to 91, its lowest level since before the pandemic.

Saving has also reduced since periods of lockdown. Figures from the Central Bank revealed that household deposits stood at over €136bn at the end of last year.

According to the CSO, households saved a third of their income during the first lockdown in spring 2020 and 30pc during the lockdowns in early 2021. This fell to 19pc in the first quarter of this year, although the ratio remains well above pre-Covid levels..

Changing attitudes to savings are attributed to rising inflation, with 38pc of those surveyed stating now is a good time to save.

“The survey results suggest that many are dealing with inflation by dipping into the savings built up during the pandemic and also recognising that, with interest rates still near or at zero, savings are losing real purchasing power in this environment,” said chief investment strategist Kevin Quinn.

He added that younger consumers are most concerned about the rising cost of housing and rent across the country, while over 30s are more focused on inflation, as well as the impact of the war in Ukraine.

Investor confidence has also tumbled in recent months, with just over a quarter of consumers believing now is a good time to invest. This marks a fall from 36pc this time last year as both equity and bond markets have been challenged by the conflict in Ukraine and the ongoing responses to inflation by central banks.

Despite this uncertainty, half of consumers also believe they are not investing enough, 2pc lower than in February.

As price rises begin to impact consumers, some are growing pessimistic about the future. A third of those surveyed are now anticipating that they will find it difficult during retirement, with 42pc stating they feel completely or somewhat unprepared for this chapter of their lives. Only 8pc agreed that they felt completely financially prepared for their later years, according to the survey. 

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