In an era of rising prices, high earners tend to save less in order to maintain their lifestyle.

A tale of two cost-of-living crises: Low incomes are buying less, while high incomes are saving less amid rising prices – and one in 20 is borrowing to maintain their lifestyle

  • About 50% of the richest two-fifths have continued to buy things they have always bought
  • More than half of them have put less money aside, a quarter have saved
  • One in 20 borrows to maintain their lifestyle and one in 12 takes advantage of a pay rise

Lower-income Britons are cutting spending to make ends meet, but affluent households are ignoring rising prices and using savings to maintain their lifestyles, new figures show.

The Bank of England found that, faced with a choice between spending more or cutting back, about half of the wealthiest two-thirds of the population have continued to buy the same amount of things as they always did – or more – despite price increases.

They made this possible by setting aside less money, according to the bank.

By contrast, nearly half of the poorest fifth of people in the UK have cut back on purchases so that they spend as much or less than before, while a quarter have cut back on only some purchases.

To buy or not to buy? Wealthy households that have decided to keep buying what they have always done generally finance these extra costs by saving less

The survey of 6,000 people conducted in September found that a total of 70 percent said the price of things they normally buy had gone up in price.

But households are responding in different ways to rampant inflation, which is the highest in 41 years at 11.1 percent, according to official figures.

Food prices have risen particularly sharply, with food inflation in the UK hitting 12.4 percent in October, a new all-time high, according to the British Retail Consortium.

According to the Bank, lower earners have mainly tried to limit the impact of price increases by buying less or by switching to cheaper replacement products.

“Meanwhile, higher-income households have continued to consume the same goods or have increased their purchases and therefore spent more overall,” it added.

These affluent households that spent more money generally financed these extra costs by saving less.

Rainy Day Fund: A Quarter Of People Turned To Savings To Sustain Their Lifestyle

Rainy day fund: a quarter of people turned to savings to sustain their lifestyle

More than half of them told the Bank of England that they had set aside less money, while a quarter spent their savings.

About one in 12 households said a pay rise had helped them meet rising costs, but one in 20 said they were borrowing to maintain their lifestyle.

While the data shows that many households, especially those with higher incomes, have been able to reduce the impact of higher costs on their spending through their savings, the overall decline in household real income seems to weigh overall on aggregate consumption. said.

Making Ends Meet: Nearly Half Of The Poorest Fifth Of People In The Uk Have Cut Back Completely Due To The Rising Cost Of Living

Making ends meet: Nearly half of the poorest fifth of people in the UK have cut back completely due to the rising cost of living

The extent to which households cut spending will be a major determinant of the extent to which the UK economy slows down.

The findings echo separate research by Hargreaves Lansdown that showed just that Higher rate taxpayers were less than half as likely as base rate taxpayers to cut back on nonessentials (15 percent compared to 39 percent).

“Higher earners are determined to brave the dire realities of rising prices and buy the things they have always bought,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

“It means they’re less likely to suffer the short-term pain of sacrificing spending.”

“As a result, however, they’re cutting savings, eating up existing funds and building up debt, so they’re primed for more long-term chronic pain.”

Separate data has shown that Britons are increasingly in overdraft and use buy now, pay later schemes to cope with the rising cost of living.

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