Despite higher costs, Brits are more financially resilient now than they were before the pandemic, according to new research from Hargreaves Lansdown.
Households have achieved this by cutting non-essential spending, with the average UK household now having £235 left over at the end of the month. This is more than double the pre-pandemic level of £110.
However, the bad news is that some groups are more vulnerable than others. Renters and single people are among those suffering the most, saving far less than the average household.
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The majority of renters only have enough savings to cover two weeks of essential spending. Meanwhile, the average single person has just £40 left over at the end of the month, compared to the average couple which has £385.
This leaves these groups more vulnerable to unexpected costs and shock events like redundancy.
For example, 73% of those in a couple have enough emergency savings to cover three months of essential spending, while only 47% of single people are in the same position.
“As life gets easier for some people, it continues to feel like one impossibly difficult thing after another for others,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.
Against this backdrop, we share six tips to cut bills and maximise your savings – whether you’re single, a renter, a mortgage holder or a parent with high childcare costs.
1. Choose a high interest savings account
Financial advisers generally recommend that you build up enough savings to cover at least three months of essential spending, if you can.
This emergency savings pot can help you cover any unexpected costs, such as your boiler breaking in the middle of winter or your car needing a sudden repair. It can also help you make ends meet if you experience a shock event like redundancy.
Hopefully you won’t need to tap into this pot, but you should keep it in an easy-access savings account so that you can quickly draw from it when needed.
With interest rates currently being held at a 16-year high, make sure you choose a high-interest account to maximise your money. The best easy-access accounts are currently paying around 5%.
Don’t just assume your provider is paying a competitive rate. Data from Moneyfacts recently revealed there are currently more than 100 easy-access savings products on the market paying less than 2%.
It is important to shop around to make sure you aren’t being ripped off. See our round-up of the best easy-access savings accounts on the market right now.
2. Pay less tax on your savings with a flexible ISA
If you have built up a substantial savings pot and are concerned that you may need to start paying tax on your savings interest, you could cut your tax bill by moving your savings into a cash ISA.
You can stash up to £20,000 in an ISA each tax year, and any income or capital gains is free from tax.
The main drawback of traditional ISAs is that they don’t offer much flexibility. If you put money into the account at the start of the tax year and then withdraw it to fund an emergency bill, you will lose that portion of your annual allowance.
However, flexible ISAs work differently and allow you to repay any funds you withdrew within the same tax year. This means you can benefit from the tax perks while still retaining the element of flexibility.
3. Cut your council tax bill with the single person discount
Many single people are entitled to pay a reduced rate of council tax. If you live on your own or with someone who is “disregarded” (such as a child under the age of 18), you can get 25% off your bill.
The average council tax bill for Band D households across England is £2,171 in 2024/5, according to the latest figures from the Department for Levelling Up, Housing and Communities.
This means you could make a saving of around £540 per year by applying for this discount – although this will vary depending on where you live and the council tax band you fall into.
4. Manage higher mortgage costs carefully
While homeowners are arguably in a better position than many renters, Coles points out that the cost of remortgaging has taken its toll.
She says: “One in five (18%) of those who have remortgaged onto a higher rate between the end of 2022 and the middle of 2024 have poor or very poor financial resilience, compared to around one in ten (12%) of those yet to remortgage.”
“Remortgagers have also seen the money they have left over at the end of the month fall to £315 – £95 less than those who are yet to remortgage,” she adds.
This is unsurprising given the journey mortgage rates have been on over the past few years. The average two-year fixed-rate deal now costs 5.91%, while the average five-year deal is 5.50%, according to Moneyfacts. Around 1.6 million fixed-rate deals will come to an end in 2024, according to UK Finance.
If you are struggling to pay higher mortgage costs, there are some options available to you. For example, lenders have agreed to a Mortgage Charter from the Treasury that sets out guidance on how to treat customers who are suffering as a result of the cost-of-living crisis. As part of this, they have agreed to offer homeowners the option of switching to interest only payments.
This could help you get by in the short term, if you find yourself depleting your emergency savings pot every month. However, it’s worth remembering that this will leave you with a large chunk of repayments to pay off at the end of a deal.
Furthermore, extending the term of your mortgage works out more expensive over the long run.
5. Cut childcare costs
The government is in the process of rolling out increased childcare support for working parents. This is great news for those struggling with astronomical costs. The first phase came into effect on 1 April this year, giving 15 hours of free childcare to the parents of two-year-olds.
From September, this support will be extended to cover children from nine months. The final phase of the rollout will come into effect in September 2025, when the allowance will be doubled to 30 hours for all children aged nine months to school age.
The bad news is that the policy could be jeopardised by staff shortages and limited nursery places. However the new Labour government has promised to convert over 3,300 classrooms into nurseries in schools with spare capacity, creating 100,000 additional nursery places.
The savings for working families could be significant – so make sure you read up on the full details on the government website for information on when to apply.
6. Cut your monthly rent
Hargreaves Lansdown’s research suggests renters are one of the most financially vulnerable groups of all. This is unsurprising when you consider how rents have soared in recent years. The average rent in London is now £2,086 per month, according to the Office for National Statistics.
Some areas are more affordable than others but moving isn’t always an option, particularly if you need to be in a certain area for work. Depending on your circumstances, getting a flatmate could help cut costs as you will be able to split the rent and bills between you.
Locking into a longer-term lease could give you some stability too, but you will need to read your contract closely as landlords often build in terms which allow them to review the rent you are paying on an annual basis.
If you are looking to buy your own home at some point in the future, but are struggling to build a deposit while paying rent, you could look into an initiative like Rent to Buy.
This is a scheme offered by housing associations, which allows you to rent a home at 80% of the local market rate. At the end of a certain period (a minimum of five years), you will be offered the chance to buy the home outright or through shared ownership.
This scheme isn’t available in all parts of the UK, and London has a slightly different version called the London Living Rent.
Alternatively, a Lifetime ISA could be a good option to help you build a deposit for a first home. When you save money into this account, the government will give you a 25% bonus worth up to £1,000 each tax year. We share further details in our ISA guide.
