A report from Scottish Friendly and the Centre for Economics and Business Research (Cebr) has revealed that just over a third of consumers (33.5%) can’t plan beyond a rainy day fund buffer until 2025.
The Family Finance Tracker report shows that despite the cost-of-living pressures easing, UK households are still focused on their immediate finances and close to half of respondents (42.2%) reported finding it more difficult to balance their financial priorities now than they did ten years ago.
Worryingly, almost a third of respondents (31.5%) stated that they find planning financially for the long-term difficult full stop. Women, parents with children still at home, renters, disabled people, and those classified as long-term sick were particularly likely to fall into this category.
The study, which included a survey of 2,600 UK consumers, revealed that the highest proportion of respondents overall (36%) ranked immediate savings goals, such as saving for a rainy day, saving to pay everyday bills, and putting money aside for a holiday, as their top priority.
Meanwhile near future savings goals, such as paying for home improvements, were put on the backburner, with only one quarter (25%) of respondents citing it as their priority.
Long-term financial goals – which includes retiring early, paying off mortgages early, or leaving an inheritance for the family – was ranked in the middle, with 32% of respondents saying it was their main priority.
For those planning over the long-term, Cash ISAs were the preferred vehicle with more than a quarter of people (25.9%) choosing them over pensions to support their long-term financial plans (22.1%). Investment ISAs came next at 17.2%, beating General Investment Accounts (GIA) and stocks and shares (13.2% and 8.7% respectively).
Kevin Brown, savings specialist at Scottish Friendly says: “The results of our first Family Finance Tracker make for very interesting reading. Household spending power has finally reached what it was pre-pandemic. However, it still falls short of where it was immediately prior to the cost-of-living crisis.
“Growth in real earnings have supported improvements in household spending and saving power. However, this advance follows on from a long period of contraction and so will take time to fully spread through the economy. Spending power in Q4 2023 still stood 6.8% lower than where it would’ve been if it had continued growing at its pre-pandemic and pre-cost-of-living contraction.
“The knock-on effect of that is that a higher proportion of Scottish households must still focus their attention on immediate financial goals such as saving for a ‘rainy day’, paying large bills, or just putting money aside for their summer holidays. Saving for future goals are either being put on the backburner or being prepared for with vehicles such as Cash ISAs which is likely due to households being more risk adverse and feeling like they may need to access their money quickly should another financial shock emerge.
“The hope is that the whole UK economy gets back to growth sooner rather than later and that permeates through to our pockets quickly. That will ease pressure and help households to be able to consider and adopt a more balanced approach to their immediate and future financial planning. That in turn may mean they feel able to use vehicles like stocks and shares ISAs and pensions to help them achieve their future goals.”
