Soaring inflation has taken an average of £5,455 from UK households in the past two years, with the UK losing £153bn to rising prices overall.
UK households spent an extra £53bn on household energy, amounting to £1,885 per household on average, over the past two years, according to Interactive Investor.
The surging cost of food has also been another headache for households, which have had to shell out an additional £32bn collectively, or £1,147 per household on average, owing to inflation over the past two years.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “This once in a generation type cost of living crisis has robbed us all of purchasing power to the tune of £153bn over the past two years, placing a huge amount of strain on household budgets.
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“There has been no escape from rampant inflation because the majority of it is reflected directly in our energy and grocery bills which we are resigned to paying as they form part of essential expenditure for many.”
Inflation, which measures the rate of price rises, fell to 10.1% in the year to March from 10.4% in February, according to the Office for National Statistics (ONS). It remains in double digits, where it has been since August last year.
Alice Guy, head of pensions and savings at Interactive Investor, said: “Inflation is a cruel taskmaster and has robbed many families of the ability to save for and build a brighter future for their families. Families have needed to find an extra £5,455 in total over the past two year just to keep their heads above water. Many people have been forced to raid their life savings or relying on credit to tide them over.”
This Wednesday, official figures are expected to show the overall rate of inflation falling to single figures for the first time in eight months. Economists believe inflation will fall to between 8% and 8.5% from the 10.1% reported in March.
Six tips to ease cost of living budget squeeze
Even with inflation set to come down, UK households will not feel an immediate relief amid the pain of the cost of living crisis. Here are six tips from Interactive Investor’s Myron Jobson to help with the bills.
Maintain a budget
“Budgeting is integral when it comes to keeping your financial house in order. It allows you to plan how much you will spend or save each month as well as track spending habits,” says Jobson.
“It’s worth keeping a spreadsheet of your own spending habits. There is a plethora of budgeting templates available for free online as well as apps to help you on your way.
Read more: Food prices to overtake energy as biggest cost of living headache in the UK
“The rising cost of living means we are saving less to maintain current levels of spending, so be prepared to make tweaks to your budget as inflation continues to rise.
“Once you have a better idea on how you spend your money, you can explore ways to help you live within your means.”
Build and maintain a rainy-day fund
“It remains good practice to keep a rainy-day fund to tide you over when times are tough financially -three months’ salary is a good role of thumb and perhaps even better in these tough times, six,” he says.
“But if you can afford it, investing can help grow your wealth and hit major financial milestones over the long term. Even modest contributions can make all the difference in the long run.”
Save on food bills
“Shop around for the best deals — especially for high ticket items. Even simple things such as opting to purchase a store brand equivalent of traditional larder products can help to cut down the cost of groceries.
“Consider buying items in bulk so you are not constantly spending as prices continue to climb. It is also worth taking advantage of supermarket loyalty schemes — such as Tesco Clubcard and Nectar card — which can give you access to unlock big discounts and other exclusive rewards.”
Shop around for the best deals
“You won’t know whether you are paying over the odds for things unless you shop around for the best deals.
Read more: Inflation: Supermarket meat, yoghurt and vegetable prices doubled in a year
“For example, if you’ve been with a broadband provider for a while, it is likely that any introductory offers will have expired, and you might be paying more than you need to. The same goes for mobile phone contracts. Shop around to see if you can get a better deal.”
Remember — financial support is available
“Those who a struggling financial needn’t suffer in silence. Don’t be afraid to ask for support.
“The various cost of living support schemes and measures to ease the inflationary crunch on budgets, including the cost of living payments, spread across 2023/24, are worth up to £900 and the Household Support fund distributed by local authorities.
“It is worth consulting a debt advice charity such as StepChange or Turn2Us and they will go through all of your options.”
Investing can be worthwhile — if you can afford to do so
“Investing your money can prove worthwhile if you can afford to keep your cash wrapped up in investments for at least five years (ideally). You don’t need huge amounts to start (as little as £25 a month).
“While past performance is not an indicator of future results, the long-term potential of the stock market is an effective tool for building financial resilience.”
Watch: UK inflation: Why are food prices rising so much?
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